Is gold ready for bearish correction?

Gold prices have been underperforming in the past two days, breaking back below the 2,320 and the 20-day simple moving average (SMA). 

Momentum indicators are pointing to a negative bias in the short term with the RSI ticking strongly to the downside. The MACD is easing beneath its trigger line losing its positive momentum. Both are confirming that a downside correction may be on the cards.  

Further losses could see the 161.8% Fibonacci extension level of the down leg from 2,079 to 1,1810 at 2,245 come into play. A drop below the 50-day SMA, which stands near 2,222 would reinforce the bearish structure in the short term and open the way towards the next key levels of 2,195 and 2,145.

In the event of an upside reversal, the 2,400 round number could act as a barrier before being able to re-challenge the record peak of 2,431.48. A rally above this level could shift the outlook back to positive, hitting the 261.8% Fibonacci extension level of 2,515.

All in all, gold prices are in the process of a potential downside retracement before switching the near-term outlook back to bullish.