Spot gold is approaching a key support area after seeing sharp declines since last week.
How low can gold go before bulls rally again?
Gold (XAU/USD) 4 hours Chart by TradingView
Increased demand for the US dollar and concerns over China’s economic growth have contributed to a decline in gold prices in the past few days. The XAU/USD pair has retreated from its all-time high of $2,480 to its current levels near $2,370.
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The pair is witnessing fresh downward pressures as traders remain on the sidelines ahead of the release of first-tier US data.
How low can the XAU/USD pair go before it sees sustained demand again?
We are targeting the $2,360 area which coincides with the S1 pivot point line ($2,369) as well as the mid-range of the technical range on the 4-hours chart.
If the pair continues its sharp declines and breaks the medium-term support level, more bears may come and drag the XAU/USD pair to the S2 line ($2,336) if not the $2,300 range support area.
On the other hand, a bounce from mid-range levels puts the XAU/USD pair at risk of returning to its previous highs. Look for bullish candles and then bullish momentum above the potential support area which could take gold to the pivot point line ($2,426) or previous highs at $2,4475.
