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Gold Prices Continue Descent Through Key Support Zone

Gold Prices Continue Descent Through Key Support Zone

2017-06-19 17:00:00
James Stanley, Strategist
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Talking Points:

- Gold technical strategy: Long-term mixed, Intermediate-term bearish, short-term bearish.

- Gold prices have continued to slide-lower after last week’s Central Bank outlay.

- If you’re looking for trading ideas, check out our Trading Guides. If you’re looking for shorter-term ideas, check out our IG Client Sentiment.

To receive James Stanley’s Analysis directly via email, please sign up here.

In our last article, we looked at the continued slide-lower in Gold prices after the double top had formed around the prior April high. After that top was set, Gold prices continued to drive lower, eventually re-entering the descending channel that’s held a bulk of Gold price action since last July.

Gold Prices Continue Descent Through Key Support Zone

Chart prepared by James Stanley

During this recent bearish run, Gold prices crossed below a key support level at $1,248-$1,249, as this is the 50% marker of that bearish run that began last July. This is the same set of levels with which support had formed at the 38.2% retracement earlier in May, right around the time that James Comey was fired. The 50% retracement of this Fibonacci setup had helped to set support in March, leading into April; and this level is also very near the $1,250 psychological level that had helped to set support in Gold prices around the Brexit referendum last year.

Gold Prices Continue Descent Through Key Support Zone

Chart prepared by James Stanley

Given that Gold prices are seeing short-term bearish momentum line-up with a longer-term down-trend, traders would likely want to move-forward with a bearish bias. The fact that we’re trading below a key support zone is in-and-of-itself a bearish quality; but given the veracity of support that we’ve seen around this level in the recent past, traders would likely want to wait for a more advantageous entry point before initiating short positions, or at the very least exude a healthy dose of caution against chasing the move-lower. On the chart below, we’re looking at two potential zones inside of recent price action that could offer that ‘lower-high’ point of resistance.

Gold Prices Continue Descent Through Key Support Zone

Chart prepared by James Stanley

If price action does not pose a bounce in the near-term, traders can re-apply this current zone of support as a future instance of resistance. If prices continue breaking-lower from here, traders can wait for ‘lower-high’ resistance to show around this zone of prior support.

For those looking to add bullish exposure to Gold, they’d likely want to wait until there is some evidence of a near-term low being in play, which at this point does not exist.

--- Written by James Stanley, Strategist for DailyFX.com

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