Originally published by AxiTrader
Gold made a low of around $1184/85 overnight.
That was a full $35 below levels gold had been trading at earlier in the week.
It's a continuation of what has been a period of very technical trading where traders have sought the refuge of Fibonacci levels as a guide to what had become a more confused outlook since the election win of US president Donald Trump.
But before I get to the current technical outlook chartists are watching I want to have a quick look at gold and its drivers.
Gold has always been a strange combination of physical demand, a hedge against inflation, a hedge against uncertainty, and increasingly just another financial market which can be traded.
Naturally given that it is traded in US dollar's movements in the buck also impact on gold.
And of course that then translates to movements in the Aussie gold, euro gold, yen gold, sterling gold, and so prices.
So there are many fundamental drivers of gold.
Two of the most important at the moment are movements in the US dollar (green line - USD Index) and US interest rates (purple line - US 2 year treasury rate). Gold is the gold/orange line and I've inverted the price so you can better see this relationship.
What's clear is that both the dollar and rates have been big drivers of gold over the past year or so. More recently - since the US presidential election - the rise in rates and appreciation in the dollar have been big weights on gold.
That's Trumponomcs impact on gold as traders bet that Donald trump's policies will both make the US a move attractive place to invest and also that Trumponomics will add to growth and lead the Federal Reserve to raise rates while other central banks retain super low, or negative, rates.
But gold is more than just a bet on Trump, his policies and their impact on the US economy, US dollar, and interest rates.
Gold a physical asset as well. It's a store of wealth in many parts of the globe, especially the developing world.
So on that front, and perhaps helping to explain a fall in some level of underlying demand in late 2016 Reuters reported overnight that 2016 was a year where gold demand fell to its lowest level in 7 years.
“Buying of jewellery, coins and bars, plus official sector and industrial demand, fell to 3,349 tonnes last year from 4,184 tonnes in 2015, the analysts said, the lowest in seven years. That helped lift the net surplus in the gold market to 1,176 tonnes, up from just 220 tonnes in 2015 and the biggest physical surplus this century” Reuters said.
But even with this collapse in demand gold was able to find support in the $1120/30 region late last year and early 2017 before bouncing almost $100 and ounce to this week's high in the $1219/20 resistance region.
That level represents the 38.2% resistance level of the fall from the post-Brexit high to the mid-December low.
A move to this level is what I also say is a "garden variety" Fibonacci pullback. It's the easy reaction after a big a move and it's one observed in multiple markets over multiple time frames over multiple decades.
It's also a hard level to break if there is not a trend change.
So given US rates are higher once again, and given the US dollar remains strong - even though it's been building its own base this week - gold has pulled back.
Last night's move was itself a pullback toward the 38.2% retracement level of the December/January rally as you can see in the 4-hour chart below. 
So what's next?
While above $1182 gold is consolidative. Should it drop through that level then support at $1171 comes into play.
The 4-hour charts suggest gold should find some support today in Asia. But the daily charts suggest it is not out of the woods yet and lower levels beckon.
Have a great day's trading.