Let’s start this brand new trading month with a look at this steady downtrend on gold prices.
Can resistance hold again?
On its 4-hour time frame, you can see that the precious metal is testing the descending trend line that’s been holding since mid-June.
Gold (XAU/USD) 4-hour Chart by TV
Now this potential ceiling lines up with the 61.8% Fibonacci retracement level and the $1,950 minor psychological mark, so gold bears might be hanging out right here.
If the ceiling holds, watch out for a continuation of the downtrend back to the swing low at $1,885 or lower. After all, technical indicators are hinting that resistance is more likely to hold than to break.
For one, the 100 SMA is below the 200 SMA, reflecting the presence of bearish vibes. Also, Stochastic looks ready to head south from the overbought zone to confirm that sellers are ready to return soon.
To top it all off, the oscillator is also displaying a bearish divergence with its higher highs while gold prices made lower highs.
The upcoming U.S. NFP release might dictate direction for gold and other commodities in the next few days, as the outcome of the August jobs report would likely affect Fed tightening plans.
Based on the precious metal’s reaction to the latest round of top-tier data, safe-haven flows stemming from recession jitters have been lifting XAU/USD. With that, gold might be in for another leg lower if risk appetite picks up this NFP Friday.
Either way, make sure you practice proper risk management when trading this one!
