Gold has found temporary support, i.e. the demand, but it may drop deeper at any time if the USD resumes its appreciation versus its rivals. The yellow metal dropped below strong support levels announcing a potential deeper drop.
XAU/USD failed to invalidate the downside continuation, so the rate could approach and reach fresh new lows soon. The price of gold was dropping at the moment of writing as the risk-on sentiment dominated the markets.
Personally, I'm using the correlation between DXY and Gold. When the Dollar Index grows, I don't want to go long on Gold. DXY's rally has forced XAU/USD to drop as of the moment of writing. Tomorrow, Fed Chair Powell, BOJ Kuroda, BOE Gov Bailey, and ECB President Lagarde's speeches at the ECB Forum are likely to shake the markets and bring sharp movements in Gold.
XAU/USD vulnerable to slide further
Technically, its failure to test and retest the downtrend line in the last attempts announce strong sellers. Validating its break below the Ascending Pitchfork's median line (ml) signaled more declines.
Now, it has found temporary support on the weekly S1 (1,729.78). A new lower low, a bearish closure below 1,728 today's low may signal a further drop towards the S2 or even lower.
Gold forecast
A valid break below 1,729.78 could activate a potential drop towards the 1,700 psychological level. The lower median line (lml) of the Ascending Pitchfork is seen as a major target. Gold could drop further as long as it stays below the downtrend line.
The material has been provided by InstaForex Company - www.instaforex.com