Gold tumbled towards 1300 in early trading on Friday before bouncing back in the afternoon, substantially due to short covering in advance of the weekend rather than new buying interest.
Gold finished the week with a large bearish red candlestick on the weekly chart, though the bulls will hang their hopes on the bullish "hammer" candlestick that formed on the daily chart on Friday. This morning however, gold looks weak again as the shorts that covered on Friday re-emerge to press the market lower again.
This looks to us like the start of another sharp decline and a head and shoulders pattern is forming on the daily chart with a target of 1180. We would therefore expect a bounce from the 1270 area and significant resistance around 1350, with an eventual return to 1180 looking likely after last week's rout.
The bulls must reclaim the 50 DMA at 1333 and 1350 early this week to start to have any hope of restarting the rally that has faded away so dramatically in the last couple of weeks. A break below 1270 will signal a swift return to 1180 and potentially much lower prices.
Today's video for subscribers looks at last week's action and our trading plan for the week.
Gold finished the week with a large bearish red candlestick on the weekly chart, though the bulls will hang their hopes on the bullish "hammer" candlestick that formed on the daily chart on Friday. This morning however, gold looks weak again as the shorts that covered on Friday re-emerge to press the market lower again.
This looks to us like the start of another sharp decline and a head and shoulders pattern is forming on the daily chart with a target of 1180. We would therefore expect a bounce from the 1270 area and significant resistance around 1350, with an eventual return to 1180 looking likely after last week's rout.
The bulls must reclaim the 50 DMA at 1333 and 1350 early this week to start to have any hope of restarting the rally that has faded away so dramatically in the last couple of weeks. A break below 1270 will signal a swift return to 1180 and potentially much lower prices.
Today's video for subscribers looks at last week's action and our trading plan for the week.