What started out as a promising double bottom for gold has quickly gone sour and now we can see a double top has formed and a bearish one at that. It seems that investors were reluctant to push the precious metal through the $1,300 mark just a week ago and since then gold has tumbled to around $1,250 at the time of writing this article.
A sustained break below this level in today’s trading session may see a move down to $1,250.
The catalyst for the recent tumble has been optimism over tax reform in the US which has passed both houses of congress and just needs a few details to be sorted out before President Donald Trump signs it into law.
Another factor that will keep gold under pressure until at least next week is the rate decision from the US Federal Reserve who are widely expected to lift rates which is already priced into the market.’
The danger for gold is that the following statement will contain news of further rate hikes which will be sooner than most expected and may also pressure the gold price.
“Gold is testing critical long-term support at $1,260 in Asian trading,” said Jeffrey Halley, senior market analyst at OANDA.
“A break of this level opens up a potential 50-dollar move to $1,200 as gold suffers from investor flight to crypto currencies and the prospect of an FOMC rate hike next week with more to come in 2018.”
The recognition by Donald Trump of Jerusalem as Israel’s capital city is likely to cause wide range instability in the Middle East and according to whom you listen to, could be come a serious problem or an outright catastrophe and such a scenario may see gold find some much needed support.