Gold Market Update
Gold broke down and went into decline, as predicted in the last update posted early this month. At that time our maximum downside target was the strong support in the $880 area, but now there are strong signs that the decline has either run its course, or is close to having done so, and that a breakout to new highs may be close at hand.
On the 6-month chart we can see how the double bearish engulfing pattern at the highs led to gold going into retreat as expected, within a tightly defined downtrend. Although price action shows little sign of the downtrend ending, we can observe several strongly bullish influences that could lead to its ending anytime soon. One is the proximity of the rising 50-day moving average, while another is the bullish alignment of both moving averages, the 50 and 200-day. In addition the price has dropped back into a zone of support, and finally short-term oscillators have neutralized as a result of the reaction, renewing upside potential. Although helpful inasmuch as it enables us to examine recent action in detail, the 6-month chart is useless when it comes to divining the major trend and determining gold’s next big move. To do that we need to refer to longer-term charts.
