Gold Finally Breaks the 20 SMA Which was Acting as Support
Skerdian Meta • 1 min read
GOLD has been trading on a bearish trend since the beginning of the year, although the trend changed by the middle of August as the sentiment turned negative in financial markets. Safe havens such as Gold attract strong bids during such events and Gold has made a bullish reversal, but if you look at the weekly chart, this reversal is more of a retrace of the bigger bullish trend that started early this year.
So, for the last several weeks, the buyers have been in control in Gold. They pushed the price above the moving averages and we know that moving averages turn into support when they are broken to the upside as in this case.
The 200 SMA (purple) turned into support first after being broken, then the 20 SMA (grey) took its place. The price has leaned on the 20 SMA, so this moving average has defined the trend since the middle of last week. But, Gold buyers failed to hold the price above $1,250 which is a big round level and Gold started reversing down yesterday.
The sellers were trying to break below the 20 SMA yesterday but they failed. Although, the buyers couldn’t make new highs today, so the sellers resumed control on Gold and they pushed back again, finally breaking the 20 SMA. Now, Gold seems set to enter a bearish phase since the 20 SMA is gone, so our sell signal looks safe at the moment.