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Sr. Technical Strategist
Gold's slide from its peak was not a slow grind but a breakdown that gathered pace once a long-running trendline gave way. Gold technical analysis shows that the break below a three-point confirmed trendline accelerated the selloff, leaving the metal down 17.6% from its peak before buyers stepped in. Gold has since broken out of the descending channel that defined its recent downtrend, yet momentum has not confirmed the latest push higher. That mix of a confirmed breakdown behind the market and an unconfirmed recovery in front of it is what gold traders have to weigh.
Michael Boutros, StoneX Media Senior Market Analyst, covers currencies, commodities and equity indices through a multi-time-frame technical lens. That coverage gives insight into how trendlines, Fibonacci retracements and momentum are shaping gold's move from breakdown to breakout.
Gold's decline from its peak gathered speed once price broke below a long-running trendline that had acted as support. "Note the trend line we were tracking from May of last year was a three point confirmed slope," Boutros says. Specifically, the break below that slope triggered the steepest part of the selloff, in Boutros's words "what really accelerated and gave us this last decline". Former slope support now sits overhead as initial resistance, so the line that once cushioned gold is the same line the recovery has to clear.
Gold broke out of the descending channel that defined its recent downtrend, but momentum on the four-hour chart has not confirmed the move. "Price action registering a higher high with the oscillator failing to confirm that new extreme in price," is how Boutros describes the divergence. As a result, the breakout carries some potential for a kickback even with the downtrend behind it. According to Boutros, the momentum oscillator sits right at the 50 line, and a slip below that line would open the door to a deeper setback.
Gold's recovery signals surface first in momentum, Fibonacci retracements and U.S. inflation data. The momentum oscillator's 50 line shows if the divergence is turning into a deeper pullback, while the 23.6% and 61.8% retracements of the decline show where the recovery holds or gives way. A break above the prior week's high shows if buyers can extend the breakout. On the macro side, the Consumer Price Index, the Producer Price Index and Treasury yields show how the inflation outlook shapes Federal Reserve policy, with strong nonfarm payrolls keeping that focus on inflation.
--- Written by Mohamed Faisal, Global Macro Content Specialist
--- Expert: Michael Boutros, StoneX Media Senior Market Analyst
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Gold volatility relative to the U.S. dollar index has climbed to more than twice its historical norm, leaving the metal highly reactive to currency and interest rate moves. A hawkish repricing of the Federal Reserve outlook shows how that sensitivity turns Treasury yield shocks into outsized selloffs.
Gold's 17.6% slide from its peak gathered pace when a long-running trendline gave way, turning old support into the first hurdle for any recovery. A breakout from its descending channel now meets momentum that refuses to confirm it.
Lower bond yields, lower oil, weaker dollar...
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