It’s been a wild ride for gold prices, but the summer rally seems to be unfolding as expected. Back in August, I wrote a piece on the trading bottom in gold prices and subsequent gold breakout. In that post, I offered key resistance levels (i.e. gold price targets) for the gold breakout. Those resistance levels have been important thus far and will determine whether gold can make its way back to 1500.
Andrew Kassen wrote a piece detailing the potential routes that gold prices may follow – a recommended read. Although bears are still very much alive, one route points to a retest of 1435 and another as high as 1550+. So what brings about these higher price targets? Well, I recently posted an important chart highlighting key gold price support at the 61.8 Fibonacci retracement level (roughly 1275). Below is the chart, updated with current price action (note it is an EOD chart, and gold is currently around 1348 as I type). Notice the gold breakout above short-term downtrend resistance.
So what produced the strong sling-shot move over the past 5-7 days: look no further than the long wick on the recent shakeout.
As well, if this is part of a larger A-B-C measured move, it targets 1500. But confirmation of that move will not come easy.
Here are two things that need to happen for the gold breakout and rally to reach 1500? Hint: Follow Through.
- Gold needs to hurdle the secondary downtrend line posing resistance around 1370-1375 (see weekly chart below). This is gold’s second rodeo with this downtrend line.
- Most importantly, Gold prices need to exceed the August highs. This will level is absolutely pivotal in determining the fate of the gold rally.
On the flip side, investors need to realize that resistance levels are just that: resistance. If gold cannot clear 1435 again, then a bearish wedge may be forming for another drop lower. Followers would be wise to keep a strict eye on the .618 Fib (1275) as well. Any move below that level would hint at a retest of the lows/new lows. And lastly, this move is corrective in nature until proven otherwise.
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No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.