Last week finished great for USD, which should have been bad for commodities in theory, although oil buyers didn’t seem bothered about this at all. This situation changes dramatically, however, when we look at gold. Precious metals are definitely feeling the rising demand for the US dollar. The situation on the XAUUSD instrument is far from optimistic.

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On gold, we finally have a legitimate trading signal. For the past few weeks, since the 24th of August to be precise, the XAUUSD has been locked in a sideways trend. This formed a pennant (black lines), which dramatically decreased volatility. A lack of bullish momentum exposed the weakness in the buyers’ camp. That resulted in a downside breakout, which brought us a technical sell signal. At the end of the week, gold tried a reversal, but that was just a technical pull-back which tested the recent support as a resistance. This is a typical movement, which can serve as an opportunity to jump into the trade for those who missed the initial drop.

The sell signal is on as long as we stay below the green line. Do not forget that on gold, we are very close to the long-term upwards trend line (10 years). A breakout of such an important support could have catastrophic consequences. That is one of the reasons why we had such a strong upswing in the middle of August. Buyers have to defend it at all costs.