Quick thoughts on Gold

• Posted by Greg Harmon
• on February 18th, 2016

Gold has had a great run higher since mid December. Rising from 1050 all the way to 1260 before the recent pullback. With the drop many are questioning it the breakout will hold or if the pullback is done. I do not know the answer to either of these questions but there are some clues in the chart to watch to see.

The first is the momentum indicators were overbought. They have reset slightly and the RSI and MACD are leveling. Should they turn back up the bottom, short term at least is in. But a roll lower and there is more downside. Next the retracement has only covers a little more than 23.6% of the move higher and not come close to a 38.2% retracement.

Should it stop here that would be a sign of strength, but many retracements even in strong trends pullback to 38.2% and in weaker or blow off scenarios to 50% or 61.8% and more. The price is also very stretched from the SMA’s. These all give a weighted view to the downside.

Next with the $1200 near it can act as a magnet. Commodities like round numbers (look at Oil around $30) and can stay attached to them for a long time. There is also the prior top that may act as support at 1189. These suggest a bottom or at least sideways consolidation could form right where it sits.

For the time being the bulk of the evidence suggest more downside but with some support very nearby. It may keep falling or stall or even reverse higher. But for now there is no evidence in the chart that suggests it is a short term buying point.

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