Gold dips $50 from ATH
Gold has dropped more than $50 from its overnight high, when it set a new a record at $2942. It is now back below $2900 as rising bond yields and the dollar provides counterbalance to haven demand amid trade wars.
At the time of writing, it was testing short-term support near $2880/84 area, where it had previously found resistance, before breaking to new all time highs.
But is this a mere dip from severely overbought levels, or a potential turning point?
Despite today's reversal, gold remains firmly in an uptrend, consistently setting new highs. However, signs of exhaustion has now started to emerge. Let's see how much of selling pressure will the bears bring here.
The price of gold had reached extreme levels amid insatiable demand lately. Indeed, the Relative Strength Index (RSI) was flashing overbought signals across multiple timeframes: the daily RSI was sitting near 78 before today's drop, while the weekly was also above 70 with negative divergence, and the monthly had pushed beyond 79. These levels suggest that a pullback or consolidation may be on the horizon, which may now be underway.
However, a clear reversal signal is needed before we can turn tactically bearish. Perhaps, if we see a complete engulfing of yesterday's range, that might be the trigger?
Anyway, this goes to show that the overbought RSI conditions serve as a warning for bulls to remain vigilant, and that one should not take anything for granted in trading.
By Fawad Razaqzada, market analyst with FOREX.com
At the time of writing, it was testing short-term support near $2880/84 area, where it had previously found resistance, before breaking to new all time highs.
But is this a mere dip from severely overbought levels, or a potential turning point?
Despite today's reversal, gold remains firmly in an uptrend, consistently setting new highs. However, signs of exhaustion has now started to emerge. Let's see how much of selling pressure will the bears bring here.
The price of gold had reached extreme levels amid insatiable demand lately. Indeed, the Relative Strength Index (RSI) was flashing overbought signals across multiple timeframes: the daily RSI was sitting near 78 before today's drop, while the weekly was also above 70 with negative divergence, and the monthly had pushed beyond 79. These levels suggest that a pullback or consolidation may be on the horizon, which may now be underway.
However, a clear reversal signal is needed before we can turn tactically bearish. Perhaps, if we see a complete engulfing of yesterday's range, that might be the trigger?
Anyway, this goes to show that the overbought RSI conditions serve as a warning for bulls to remain vigilant, and that one should not take anything for granted in trading.
By Fawad Razaqzada, market analyst with FOREX.com
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.