Bearish momentum in Gold continues to roar as bulls simply can't get a break. Prices were already bearish due to the surprising lack of military conflict between Russia and Ukraine even though Russia has successfully claimed Crimea. Even a reported confrontation that left one Ukrainian serviceman dead failed to spark anything more serious, and it is clear that Ukraine itself are trying to avoid any military conflict at all costs, erasing all the premium in Gold that had been priced in earlier when the market was afraid war might break out.
Unfortunately, Gold traders have a new problem to contend with - rising interest rates. Fed Chairman Janet Yellen provided surprising clarity when asked when the Fed will start raising rates and she mentioned that it would take "around 6 months" after the end of the QE program, which is slightly earlier than what the market had previously expected. Time will tell whether this was a gaffe or a sly calculated remark, but the implication is the same - inflation risk moving forward will be even lower and not only that, higher interest rates would make holding Treasuries much more attractive as a safe haven alternative rather than holding onto Gold which actually has a negative holding cost. It is not surprising to see that Gold tanked more than 15 dollars an ounce after the announcement.
Hourly Chart
Prices have recovered slightly during Asian hours, but that is not really surprising considering the broad risk-off sentiment seen in stocks will continue to have a bullish influence on prices, no matter how small. Also, prices have came a long way from the $1,360 to $1,325 movements within the same day, and a temporary pullback is always to be expected. On balance, it is clear that bearish momentum is still in full force as Stochastic readings have flattened and are threatening to start reversing lower. This concurs with what we see in terms of price action wherein price is unable to break soft resistance at $1,333. As such, even though prices appear to have rebounded off the Channel Bottom and should naturally seek a Channel Top, it is possible that prices may simply revert lower from here, due to overwhelming bearish pressure or at least stay flat for the rest of the day until the Channel Top is tagged.
Daily Chart
Things don't look as bad on the Daily Chart though. Prices have a few levels of support in the form of a Channel Bottom at $1,325 and $1,315. Also, Stochastic readings are close to the Oversold region and we should be able to expect some form of bullish reply after such a sharp decline this week. At the very least, it is possible that traders who have shorted Gold earlier may wish to take profit before the end of the week, which will provide bullish pressure in the short-run. Also, we need to watch out for institutional speculators that have been buying Gold heavily over the past couple of months. The decline in prices may spur these speculators to clear their positions (if they haven't already done so) but there is also equal if not more likelihood that they may want to load up even more Gold at current "bargain prices".