Gold drops $15 from 2017 highs, erases daily gains

Gold opened sharply higher after escalating tensions with North Korea following another missile test that went over Japan. The yellow metal peaked during the European session at $1,326/oz, the highest levels since the US Presidential elections. In New York, the US dollar gained momentum and gold retreat sharply erasing all gains. 

Near the end, the metal trades at $1,311 at the lowest of the day and marginally higher from yesterday’s close. The sharp retreat represents a correction so far as the ounce remains firmly above $1,300. Immediate supports are seen at $1,310 and $1,303.

On Wednesday, the US ADP employment report will be released and could have an impact on the US dollar. Another test from North Korea or a new statement from President Trump could increase volatility in gold prices. 

Technical outlook 

“In the daily chart, the RSI indicator retreats modestly within overbought territory, whilst the Momentum indicator turned flat well above its mid-line, as the price holds far above its moving averages, indicating a limited downward scope for Wednesday”, said Valeria Bednarik, Chief Analyst at FXStreet.

In the 4 hours chart, technical indicators have retreated strongly, warns Bednarik, “but remain at overbought levels, while moving averages head firmly higher well below the current level, in line with the longer term perspective.”