Gold began the week on the backfoot, dropping towards $3,320 to trade at its lowest level since last Thursday. Traders hit the ‘sell’ button as they watched the US dollar soar following news that the US and EU had reached an agreement on trade and tariffs.
But gold soon found a floor and by mid-morning in Europe it had recovered off its lows. It then ran into some mild resistance around $3,340 and pulled back into negative territory soon after the US futures market opened.
Source: TN Trader
The question is whether gold has pulled back enough to reset the daily MACD and prepare for another leg higher, or if it must fall further first. For now, it continues to be rangebound, while the MACD meanders around the neutral level, so unable to provide clues as to gold’s next move.
It’s perfectly reasonable to believe that gold’s multi-year bull run topped out in April at $3,500. But by the same token, many traders feel that gold has the potential to rally further, citing the significant central bank purchases that were one of the catalysts for gains over the last few years. There is no reason why gold couldn’t rally to new highs from current levels.
Certainly the daily MACD has reset after being extremely overbought in April. But it could be that gold needs to fall further from here, selling off sharply and forcing a large scale bullish capitulation. While that would strengthen the argument that the top is already in, it could also set the stage for another rally to fresh all-time highs.
