Gold Is Likely Looking Down on Correction

Physical gold continued to catch a bid last week, reaching trading above $1,730 an ounce, on a host of head-spinning economic news, from millions of more Americans filing jobless claims to record money-printing and negative oil prices.

Gold failed to capitalize on its intraday recovery move, instead met with some fresh supply near a resistance marked by 100-hour EMA and refreshed daily lows during the early NA session. A strong opening in the US equity markets weighed on the precious metal's safe-haven status and turned out to be one of the key factors behind the sudden fall over the past hour. The downfall once again managed to find some support ahead of the $1690 region, which should now act as a key pivotal point for short-term traders. The technical set-up warrants some caution before placing fresh directional bets.

Papua New Guinea's government is threatening to take control of Barrick Gold's (NYSE: GOLD) Barrick’s Porgera gold mine after the company's local unit suspended operations following news the mine's lease would not be renewed. Prime Minister James Marape warned Barrick Gold Corporation in a social media post yesterday that he would be forced to take control of the mine if it were to be closed during the transition period.

Meanwhile, technical indicators on hourly charts have been drifting lower in the bearish territory and support prospects for an eventual break below the mentioned support.

However, oscillators on the daily chart – though have been correcting from higher levels – maintained their positive bias and warrant some caution for aggressive bearish traders. It will be prudent to wait for some strong follow-through selling below the mentioned support before positioning for any further near-term depreciating move.

Gold might then accelerate the slide towards the $1678 intermediate support before eventually falling to last week's swing lows support, around the $1660-59 region. On the other side, the $1712-14 region might continue to act as an immediate resistance, above which the bullion could be headed back towards the $1730 supply zone.