- Gold erased more than 4% last week and closed below $1,950.
- Correction could extend to $1,850 area if bearish pressure remains intact.
- $2,000 psychological resistance will be a key level to watch.
After closing the previous nine weeks in the positive territory, the troy ounce of precious metal finally staged a deep correction and lost 4.45%, or nearly $90, last week. Profit-taking and improving market sentiment throughout the week made it difficult for gold to find demand.
Gold technical outlook
Following the sharp drop witnessed during the first half of the week, XAU/USD rose modestly on Thursday but failed to close above the 20-day SMA on Friday. On the downside, $1,930 (Fibonacci 23.6% retracement of March-August uptrend) could be seen as the first support ahead of $1,860/50 area (50-day SMA, Fibonacci 38.2% retracement, August 12 low).
On the flip side, $2,000 (psychological level) aligns as a key resistance. With a daily close above that level, XAU/USD could again target record highs it set at $2,075 earlier in the month. However, unless there is a fundamental driver, such as a drastic shift in market sentiment, the pair could struggle to push higher as longer-term charts continue to show extreme overbought conditions.