Gold tumbles below 1200 level; Pullback or Bearish Leg?

Currently, Gold spot is trading at 1197.73, down -0.92% on the day, having posted a daily high at 1209.73 and low at 1193.32. 

Historical data available for traders and investors, during January, indicates that Gold had the best trading day at +1.41% (Jan.5) or 1664-pips, and the worst at -1.11% (Jan.18) or 1331-points.

Lucky 20,000?

Myra P. Saefong and Rachel Koning Beals, Market and News Editor at Market Watch, reported, "Gold futures dropped Wednesday as investors turned their attention to a rise in U.S. equities, with the Dow Jones Industrial Average crossing the key 20,000 level for the first time. Gold fell even as the U.S. dollar weakened, bucking their typically inverse relationship as U.S. stocks traded broadly higher."

“Investors are excited about the 20K mark for the Dow DJIA, +0.76%... and this has faded some interest for the metal,” Naeem Aslam, chief market analyst at ThinkMarkets, told MarketWatch. “The king dollar is weak today, but we are not seeing much of influence of this on the gold price,” Aslam said. If Trump “does involve himself in a currency war, we could see the dollar going much lower, which could push the gold price higher.”

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1198 (50-SMA) and above that at 1218 (horizontal resistance). While supports are aligned at 1193 (100-SMA) and below that at 11.77 (low Jan.11). On the other hand, Stochastic Oscillator (5,3,3) seems to rebound from the oversold territory without a strong conviction, therefore, there is evidence to expect the metal to trade lower in the near term.  

On the medium-term view, a break above 1222 (horizontal resistance) would open doors to challenge 1236 (100-DMA). On the other hand, a failure to hold above 1193 (today's low) would shift risk in favor of a drop to 1177 (50-DMA). If prices close and open below this level, then the next logical support targets to considered for sellers are aligned at 1162 and 1132.

Gold: Turning Points Appear Suddenly, So You Must Be Prepared