Gold slips under $4,100 as bears press for a fresh downside break

Gold has found itself back in hot water this week, with the metal changing hands below $4,100 in today's session as sellers look to tighten their grip on the market.

For the better part of the past few weeks, trading in gold has revolved around a $4,100-$4,200 range. Yesterday, price action invited a test of the lower edge of that range. With that floor under threat once again, there is plenty of reason for buyers to feel uneasy about the way things are heading.

Looking at the bigger picture, the fundamental backdrop is still a tough one for gold. Treasury yields may not be back at multi-decade highs, but they remain elevated, and that keeps a non-yielding asset such as gold at a disadvantage. The renewed jump in oil prices is adding to inflation concerns and keeping alive expectations that the Fed will tighten further. For gold, that is hardly a supportive combination.

Even if that is set aside, the technical picture is hardly reassuring on its own.

Since the drop seen in late September, every attempt by gold to recover this month has run into sellers somewhere near $4,200. The 100-day moving average has acted as an additional barrier to any serious rebound, though buyers have not even shown much willingness to test it in recent weeks.

That brings the immediate focus to the downside floor in the $4,100-17 zone. Gold is again trading below $4,100 today, and the question is whether this third test finally lets sellers break through.

A firm daily close well under $4,100 would open the door to another leg lower toward the psychological $4,000 level. Beneath that, the next downside target is the July low around $3,960.

For the bulls, the most important step toward reducing the immediate pressure remains a move back above $4,200. Given that the two important daily moving averages remain comfortably above the market, though, the wider technical view keeps pointing to the sellers.

For the time being, then, I would be more worried about support giving way than about banking on a rebound.