For the last couple of days we mentioned that Gold bulls should be very cautious as the entire move from 1,208 seemed complete. We favored neutral positions and raised stops to protect our long positions. Additionaly we said in previous posts that it was time for a downward move towards 1,300 with 1,320 as the first target. Yesterday we mentioned that breaking below 1,339 would open the way for a downward push towards 1,320. This is exactly what happened yesterday.
Prices reached the 38% Fibonacci retracement of the 1,270-1,347 move. For now we can label this downward move as corrective, but a new low below 1,312 will make an impulsive move from 1,347 complete. This will imply further downside is possible. Bulls would like prices to hold the 61.8% retracement at 1,300. If this level breaks, then the bullish scenario will be in danger. Breaking below 1,300 will show weakness and this will increase the chances of success of our primary wave scenario that the entire upward correction from 1,180 is over at 1,347.
Gold trend is changing to down as expected since prices reached the upper boundaries of the upward sloping channel and the wave pattern from 1,208 is complete. We at least expect a pullback towards the lower boundaries of the upward sloping channel as shown in the chart above. Stop for bears is the 1,347 high and target the 1,300 price level. We favor short positions now that support has been broken. Short-term resistance is found at 1,327 and short-term support at 1,310. I expect to see more downside as long as prices trade below 1,330. Otherwise, the highs will be put to the test.
