Gold (XAU/USD) – Bulls Losing Grip

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Gold (XAU/USD) - Bulls Losing Grip

Short-term Shift: Last week, there was a shift in the outlook for gold price, from a technical perspective. Essentially the technical picture for gold in the 1H and 4H charts turned from bullish to bearish/neutral. The outlook on the daily chart remains sideways. Let’s first take a look at the 1H chart:
gold 1h chart 8/18

(click to enlarge)

Signals in the 1H chart: Last week’s consolidation at first held the prevailing bullish momentum as the 1H RSI reading tagged above 70, and held above 40 on the dips. However, this all changed on Friday, when price fell sharply. Gold price was also trading above the 200-hour SMA throughout the week, that is until Friday. Now, the RSI has tagged below 30, and even 20, while price has fallen below the 200-hour SMA. After a brief short-squeeze, traders respected the 200-hour SMA as resistance, and essentially treated the broken triangle as a price top.

At least in the short-term, the outlook has shifted from bullish to bearish. The 4H chart also shows a shift:
gold 4h chart 8/18

(click to enlarge)

Bulls Losing Grip: You can see that gold started August with a break above a falling wedge. This was accompanied by price pushing above a cluster of moving averages and the RSI pushing above 70. However, by the end of last week, price fell back below the cluster of moving averages, and the RSI failed to hold above 40, which is a sign that it lost the bullish momentum.

While bulls gold-bulls might be losing grip as evidenced in the 4H and 1H chart, it is still not clear if bears will take over. Looking at the 4H chart, you can see that price instead of a bearish market, gold might just be in a sideways market, especially if price does not break below a slightly rising trendline from the beginning of August. A break below 1290 might be needed to introduce a more bearish outlook.

At this point, a break above 1310 will reflect gold-bears losing grip. Whichever way you look at it, gold is neutral in the medium-term, a mode that gold’s daily chart suggests as well.
gold daily chart 8/18

(click to enlarge)

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.