Gold was sharply lower in early trade this morning, having broken below $2,900 at one stage. By midday it had bounced off its lows, breaking back above $2,900 while still in negative territory. It traded at a fresh all-time high on Monday last week. But it subsequently sold off sharply, dropping 4% over the rest of the week.
This came as little surprise to many traders, as according to its daily MACD gold was seriously overbought, although it had been since early February.
Source: TN Trader
The MACD is often helpful in highlighting changes in market direction, although it offers few clues to the timing of significant moves. That 4% decline was a minor blip in the rally which took off this year, but has arguably been building since December 2015, when gold was trading close to $1,000 per ounce. Gold has recovered this week. But the big question is if last week’s correction is all there is, or if there’s more downside to come.
Gold is certainly back in favour with investors, who see it as an alternative investment vehicle, and potential ‘safe haven’. At the same time, it is far less volatile than Bitcoin and other cryptos which tend to follow stock market movements. Last week’s sell-off has certainly helped to take the MACD down from overbought levels. While still a long way from being neutral, the pullback in the MACD is enough to give gold some room to the upside.
