Gold price slips, rips, then dips: But what's next for XAUUSD?

Summary:

The Gold price has been on a rollercoaster ride since Friday. After Sunday's massacre, a riotous rally followed, but XAUUSD may soon resume the slide.

The Gold price has been on a rollercoaster ride since Friday. After Sunday’s massacre, a riotous rally followed, but XAUUSD may soon resume the slide.

Spot Gold is treading water this morning at $1,734 (+0.25%) as traders digest the madness of the last few days.

Although Gold’s decline started on Friday following the upbeat jobs data out of the US, Sunday Night did the real damage.

In thin trading conditions, the market shocked lower as sellers unleashed huge $4 billion of notional into the liquidity vacuum. Why sellers decided to unload a large volume transaction at this time is debatable. However, what isn’t in question is the effect it had on the Gold price.

The selling accelerated as the price broke below the technical support at $1,760. Undoubtedly the pace of the decline was aided by systematic momentum chasers and stop-loss sell orders.

As a result, XAUUSD was forced lower to the key support of $1,676 before it embarked on a face-melting rally to $1,753. Since then, the market has been in limbo, searching for direction. This has left both the bulls and the bears in a state of paralysis, wondering what’s to follow.

Will XAUUSD Recover?

If we look at the daily chart, it doesn’t offer much immediate assistance. The Gold price is now at the mercy of the key resistance at $1,760 and the major support at $1,676.

As I stated in Monday’s report: “The technical outlook remains negative as long as the price remains below $1,750-1,760”.

And I think that’s still the case today. However, the bulls will be encouraged that the price is a lot closer to resistance than support. However, until the price clears out at $1,760, a return to the support is likely.

Traders should also focus on US treasury yields and their effect on the Dollar. The US 10-year yield remains well bid at 1.313%, and Dollar index futures are also firmer this morning at 93.08.

Should the greenback appreciate against its peers this week, it may exert additional downside pressure on XAUUSD.

However, above $1,760 and the outlook turns positive. In this event, the psychological $1,800 level is an obvious target for the bulls.

But for now, both sides of the trade are likely to remain frustrated until the Gold price decides which direction it is heading in next.