Gold has finally broken out of the sideways triangle that has been in from the end of May. Although at first it showed bullish signs by breaking above the 1411$ resistance, the reversal was decisive. Prices on Friday plummeted by more than 20$ towards 1380$. The pattern formation in Gold is now a bearish flag that points to more weakness and selling to be seen in the next sessions. Trend both short term and longer term is down. We at least expect prices to re-test the 1340-50 area as the upward move from 1340$ is overlapping thus corrective.
In the chart above you can clearly see that after the sharp decline from 1480$ to 1340$, prices have bounced in an overlapping corrective pattern. Prices have bounced up to the 50% retracement and we believe it is more probable to see a new downward move starting now, with the decline of past Friday being the first signal of what to expect next. Either way, should be cautious if prices break above 1422$. It would be normal to see an upward bounce towards 1400-05$, but for the bearish scenario to be confirmed, prices should not break above 1422$.
Below you can see the daily chart and the bearish flag pattern that implies more weakness and selling pressures are to be expected in the near future. If prices manage to break above 1422$, we believe that Gold will be heading towards 1480-1500$ area.
For more help trading Gold, don’t hesitate to contact us. As always, thank you for taking the time to catch up on my thinking.
A term used to describe a trader (bear) who is expects that a particular asset – be it a commodity, currency or product – to fall in value. The opposite of a ‘bull’.
The idea is that bears attack by getting up on their hind legs and striking their opponents down with their paws, symbolising the fact that they are sellers driving prices down.
Beliefs held by the aforementioned ‘bears’ of the trading world, are described as bearish. Characterised by a generally pessimistic outlook on the state of a given asset, a bearish outlook would suggest that a fall in value is imminent. Opposite of bullish.