- Declines hover as we usher in the new week, gold could plummet to 1,850 if the 50 SMA support caves.
- The uncertainty over President Trump’s hospitalization could positively impact gold in the week ahead.
Gold closed the trading this week at 1,897, as reported on Saturday. The rally above 1,900 was mainly attributed to the news that the US President, Donald Trump, had tested positive for COVID-19. Trump’s doctor said that he is “doing very well” but must stay in the hospital for a few days. However, uncertainty continues to mount in the stock market over Trump’s illness and the presidential election only a few weeks away. However, many analysts expect that gold will capitalize on this uncertainty to post gains in the coming days.
Looking at the 4-hour chart, XAU/USD is hanging in the balance after rejection from 1,900. The formation of a bear flag pattern adds credence to the downward momentum. If the pattern’s support gives in after the markets open on Monday, the precious metal could dive much lower.
XAU/USD 4-hour chart
Support is envisaged at the 50 Simple Moving Average (SMA) in the 4-hour timeframe. However, danger looms, especially if the moving average support fails to hold the price. Gold can push the bearish leg to levels around 1,850 before a significant recovery comes into the picture. The Relative Strength Index (RSI) in the same 4-hour timeframe emphasizes the downward momentum as it risks sliding under the midline.
It is worth mentioning that the bearish leg could be invalidated if gold holds above the bear flag’s support. Moreover, if the uncertainty surrounding Trump’s hospitalization mounts in the stock market, gold is likely to capitalize on the falling prices and resume the uptrend to 2,000.
Credit: FX Street