Gold bear momentum is compounded by positive US GDP

• The better-than-expected US GDP  supported the US Dollar and added the selling pressure on commodities including gold.
• Gold bears are in control and the next downside target is seen at 1326.

Gold is trading at around 1,334.8 down 0.8% on Wednesday after the US GDP growth rate was revised upwards promoting the value of the US Dollar that traditionally trades inversally to commodities, including gold. The annualized US Gross Domestic Product (GDP) came in better than expected at 2.9% versus 2.7% consensus forecast in the fourth quarter last year. The Personal Consumption Expenditure (PCE) price index increased 1.9% in the fourth quarter of 2017, in line with expectations. The news added strength to the already positive sentiment on the greenback since Tuesday. The US Dollar Index is trading at 89.77 and nearing the 90 psychological mark.  

As the US news came in, there has been no major reaction in the yellow metal except from some profit taking on the bear’s side which saw gold gaining about $4 as bulls tested the 1336 resistance level. The pullback up was short-lived as the market quickly traded back down towards the 1,333 level. 

Gold 4-hour chart

Bulls have found some support at the 50-period simple moving average close to the 1,333 level. The bear momentum started on Tuesday with the threat of a US-China trade war receding. The bear pressure is compounded by the positive US macroeconomic data released in the US session; which in turn boost the US Dollar and is therefore seen as negative for gold. The next key level of support is seen at 1,326 last swing low and 61.8% Fibonacci retracement level from the last bull leg made between March, 20-27. If the bulls fail to defend the 1,326 level, it opens the possibility of a move down to 1306 multi-month support. Resistance is seen at 1,340 previous swing low and 1,350 figure supply/demand level.