Gold – Struggling Near Previous Record Highs And Showing Signs Of Weakness

(January 16, 2024 - Craig Erlam)

• Bearish correction underway?
• A lot of rate cuts are now priced in
• Fib bounce may be a bearish signal

Gold is trading a little lower on Tuesday after bouncing higher once again in recent sessions.

The yellow metal remains buoyed by very aggressive rate-cutting expectations, particularly in the US, but at the same time, it is struggling to generate fresh momentum around the prior record highs, near $2,070.

We saw a spike in early December well above this but the timing of the move and the speed with which it reversed it suggests the market was never fully behind it, so the prior highs continue to look like a significant psychological threshold.

From a technical perspective, the lost momentum is evident in the repeated failure in recent weeks to surpass the prior highs, albeit with the spike in December arguably not reflecting true market sentiment at the time, hence the swift reversal.

Source – OANDA

It has since broken below a rising trendline which may further reinforce the view that the rally since early October is running on fumes and a correction is potentially underway. As you can see from the 4-hour chart below,  the rebound from Thursday’s low both appears short-lived but also ran into strong resistance around the 61.8% Fibonacci retracement level – 28 December high to 11 January low. This again could be viewed as another bearish signal.