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Gold Plunges, but Lands at Key Fibonacci Support - is a Bounce Coming?

Gold Plunges, but Lands at Key Fibonacci Support - is a Bounce Coming?

Christopher Vecchio, CFA, Senior Strategist
Gold_Plunges_but_Lands_at_Key_Fibonacci_Support_-_is_a_Bounce_Coming_body_Picture_10.png, Gold Plunges, but Lands at Key Fibonacci Support - is a Bounce Coming?

Chart prepared by Christopher Vecchio using Marketscope 2.0

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FOREX Analysis: Gold has dropped by -25% this quarter. Call it what you will, but these are liquidation type conditions, not the hallmark of rational investing. With that said, Gold has fallen into the 10/20 RSI support region, where price has held on numerous probes lower ultimately producing a short-term rally. More recently, daily RSI has only dipped into this region in mid-February and mid-April. Accordingly, because the trend is still down, we look for any rallies in precious metals to be sold until sufficient technical evidence mounts to warrant a suggestion otherwise.

FOREX Trading Strategy: It is possible, however, that a near-term bottom in Gold may be around the corner. Basing just below $1200/oz shouldn’t be dismissed, as at 1189.91 lies the 100% extension of March high/April low/April high move, as well as the 61.8% extension of the October high (post-QE3 announcement)/April low/April high move at 1192. Time is a factor of course, and the longer Gold lingers near these key levels, the higher the probability of a break towards 1000.00/25.

--- Written by Christopher Vecchio, Currency Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.