Gold Bulls on Notice: Cracks Forming in the Rally’s Foundation

Traders should be alert to the growing risk of a downside move in gold.

Bullish momentum underpinning the rally has weakened over recent weeks, alongside shaky price action.

RSI (14) has diverged from price, setting lower highs even as the latter briefly hit record levels. The bearish momentum signal has been confirmed by MACD, which has turned lower decisively.

While bulls defended uptrend support on Tuesday, resulting in a decent bounce, that’s unlikely to perturb bears given the increasingly unconvincing technical picture, punctuated by the bearish engulfing candle delivered during the session.

If we were to see a sustained break of the uptrend, keep a close eye on the price action around $2882.40—a level bullion tested either side on multiple occasions earlier this month. A break below could open the door to $2390.

Good luck!
DS