We commented in our online blog on Friday that gold looked set to test key support at 1625 and a break of that support would likely see a rapid drop to 1600.
This is exactly how things played out, with the market dropping dramatically once 1625 was taken out as a raft of sell stops were triggered. The market eventually found support at the lower trendline at 1596, with gold deeply oversold on all time frames from the daily chart downwards.
This morning, gold has recovered slightly on the back of renewed physical demand out of China, as market participants return from a week long holiday. The market has also seen bargain hunters seeing value in gold at these levels, with the daily RSI at a level that has seen recovery rallies in the past.
The danger of continued weakness cannot be ruled out, as the 1625 key support was decisively broken on Friday, however we consider a recovery rally to be the most likely outcome over the next few days. The US markets are closed today for President's Day, so we will probably see very quiet trading for the rest of the day.
Today's video looks at where Friday's price action leaves the "big picture" and our targets for a bounce from here.
This is exactly how things played out, with the market dropping dramatically once 1625 was taken out as a raft of sell stops were triggered. The market eventually found support at the lower trendline at 1596, with gold deeply oversold on all time frames from the daily chart downwards.
This morning, gold has recovered slightly on the back of renewed physical demand out of China, as market participants return from a week long holiday. The market has also seen bargain hunters seeing value in gold at these levels, with the daily RSI at a level that has seen recovery rallies in the past.
The danger of continued weakness cannot be ruled out, as the 1625 key support was decisively broken on Friday, however we consider a recovery rally to be the most likely outcome over the next few days. The US markets are closed today for President's Day, so we will probably see very quiet trading for the rest of the day.
Today's video looks at where Friday's price action leaves the "big picture" and our targets for a bounce from here.