Bearish signals in gold set up a drawdown potentially to $1630
Gold lost about 3% on Monday alone and touched $1809 at the start of trading on Tuesday. Yesterday’s sell-off provided us with four medium-term bearish signals on the daily timeframes.
First, the daily candlestick completely absorbed Friday’s bullish momentum, clearly showing the strength of the bears.
Secondly, gold’s recovery stalled on the approach of the 50-day moving average. The strong reversal indicates that the medium-term trend remains bearish.
Third, in a decisive move, gold has moved below its 200-day moving average, a significant long-term trend signal that works well in gold. A consolidation below this line is a prologue to a further downtrend. Knowing this, investors often increase selling on such a signal, intensifying the fall in the coming days after a consolidation below this line.
