The new week, month and quarter has started brightly for the U.S. dollar, with both the Brish pound/U.S. dollar (GBP/USD) currency pair and euro/U.S. dollar (EUR/USD) currency pair trading lower at the time of this writing. The euro has been undermined in part by the controversial independence referendum in Catalonia region of Spain at the weekend, while the pound has been hit by weaker-than-expected UK manufacturing PMI data. The dollar itself has been in demand over the past several weeks as the bulls took advantage of oversold conditions on renewed hawkish rhetoric from the Federal Reserve to buy the dip. Meanwhile, investors are continuing to ignore geopolitical risks, as their insatiable appetite for risk continues: U.S. index futures have hit new record high levels, while European equities – except in Spain – have also risen. Dollar-denominated and safe haven gold has consequently fallen out of favor.  But are risk-seeking investors being a bit… reckless?

Sunday’s “illegal” independence referendum in Catalonia saw just under 90% of the people vote in favor of the region seceding from Spain, even if not all were allowed to vote. There was another terrorist attack in France, where a man stabbed two women outside of Marseille’s main train station. Overnight another terrorist attack in Las Vegas has left at least 50 people killed and scores injured in a mass shooting at a concert. North Korean tensions rose again after U.S. President Donald Trump in a tweet described the talks between his foreign minister Rex Tillerson and North Korea as a “waste of time.” Yet, the global equity markets have hardly reacted to any of these events in a meaningful way and there’s been very little interest in gold, for otherwise, its price should have surely been higher.

But sentiment could turn sour very quickly, especially given the overstretched U.S. equity market rally. Any sudden drop in the equity markets should see demand for gold rise again on safe-haven flows. I think it is only a matter of time before this happens. But so far a Wall Street sell-off hasn’t materialized and there is no point in trying to predict when this will happen. But when it does, it will be very obvious. Regardless of the equity markets, gold could find support in the event the dollar rally stalls again. This could happen if, for example, Friday’s U.S. jobs report turns out to be extremely weaker than expected. Already, not many people are expecting to see a big print on the headline number, owing to the impact of the recent hurricanes.

For now, though, the trend is clearly bearish and has been so ever since gold failed to hold its own above the breakout level of $1295-$1300 last month. Only if and when gold reclaims this resistance area will the trend turn bullish again, unless of course, we see some significantly bullish price structure at lower levels first. But as things stand, gold looks like it wants to head further lower in the short-term outlook. The longer-term outlook is not very clear at the moment. But when you take into account the above fundamental consideration then gold may come back strongly at some point down the line. For now, it is worth watching for signs of support around the Fibonacci levels shown on the chart, the 200-day average, or around the support trend of the bullish channel. Once the buyers step in, we should see a sharp bounce; then we know that a low – at least a short-term one – has been established.