Chart of the week – Gold (cash)
Gold (cash) plummeted to test key medium-term support zone
Short-term technical analysis
Time stamped: 20 Jun 2021 at 5:00pm SGT
Source: CMC Markets
- The recent decline seen in Gold (cash) from a 5-month high of 1.916 printed on 1 June has been reinforced by the surprise hawkish projection of future interest rate hikes as seen from latest the US central bank, Fed’s dot plot released on 16 June, FOMC where an increase number of Fed officials have brought forward the first interest rate hike to 2023 from 2024 and several officials are even advocating for two hikes before 2023 ends.
- Gold (cash) has tumbled by -5.16 for two consecutive sessions since the latest Fed’s FOMC announcement on 16 June at 1400 GMT to print a low of 1,761 on Friday, 18 Jun. The on-going decline is now resting at a key medium-term pivotal support zone of 1,750/1,723 which is defined by the former neckline resistance of the “Double Bottom” formed from 9 March 2021 to 31 March 2021 and close to the 61.8%/76.4% Fibonacci retracement of the prior 8 weeks of uptrend from 31 March 2021 low to 1 June 2021 high.
- The 4-hour Bollinger Bandwidth (a measurement of relative volatility of price action) has reached its 6-month high of 0.07 coupled with the 4-hour Relative Strength Index (RSI) that has hit an extreme oversold level of 17%. These observations suggest that the current decline is overstretched where the odds of a snap-back/mean reversion rally has increased at this juncture.
- If the 1,723 key medium-term pivotal support holds, Gold (cash) may see a snap-back rally towards the intermediate resistances of 1,800 and 1,852. However, a 4-hour close below 1,723 invalidates the short-term bullish bias for the continuation of the waterfall slide to retest the 1,676 major range support of 9/31 March 2021.
