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Talking Points:

  • Gold Technical Strategy: Flat
  • Gold extends down-trend after recent inflection off of the 61.8% Fibonacci retracement of the most recent major move.
  • Standing aside until a more-confirmed short-setup becomes clear.

Gold prices are continuing to seek out a bottom, as near term support has come in slightly above the 1,100 psychological level, intersecting with the supported trend-line that’s been active in Gold since mid-July. After hitting a five-year low in July, buyers propelled the yellow metal to the mid-line of the channel that started on August 28th, 2013. This also coincides with the 61.8% retracement of the most recent major move, highlighting a confluent level of resistance in a strong down-trend.

From here – traders are confronted with the juxtaposition of looking to sell in an already weak market; or looking to buy in a market that’s exhibiting a multi-year down-trend. Long positions could offer attractive risk-reward ratio with stops below the 1,100 level, and profit targets in the 1,135 vicinity. With current price, this could offer a 1-to-2.5 risk-to-reward ratio that could make such a reversal play an attractive prospect.

However, the more attractive long-term setup is to the down-side. For that type of entry, traders would be best advised to wait for either a) price moving up to resistance or b) wait for confirmed breaks of support. The Support level with the most attractiveness longer-term would be the 50% Fib of the big-picture move (1999 low at 253.20 to the 2011 high at 1920.80). Gold spent the last two weeks of July and the first week of August attempting to break below this support at 1,087.05, but to no avail. Breaks of this support would open up targets at the 1,000 level and then 974.67 (76.4% retracement of the most recent major move.

Gold Price:  Down-Trend Resumes, but Actionable Setups Remain Elusive