INTERMEDIATE TERM TREND BEARISH
SHORT TERM TREND BEARISH
VERY SHORT TERM TREND BULLISH
In our last update, we noted that gold had managed to stabilise above the 1750 level that was hit at the end of June, with any renewed selling action seeing buyers step in. For several weeks, the price had bounced around in a narrow range, unable to break above 1800 resistance but well supported at 1750. Slowly but surely, the bulls forced the price higher and after breaking through resistance at 1800 and further resistance at 1810, the rally started to accelerate, culminating in a break of the important August downtrend line.
Since that update, gold found resistance at the convergence of the 233 and 55 day Moving Averages at 1833, just $20 or so above the August downtend line. Once the uptrend was broken on 5 August the selling accelerated dramatically, culminating in a precipitous drop of over $80 overnight on Sunday, with the price falling below 1700 for the first time since March. Gold bounced off support at 1680 and closed the day some $50 off the lows.
The price action in the last couple of sessions suggest to us that the down trend is still in play and gold is struggling to make any further headway – as long as the price remains below 1750, the risk of further significant declines remains high.
Gold is now trading well below all of the major Moving Averages and the August 2020 downtrend line. This line is now below 1800 and will provide initial strong resistance, with the Moving Averages between 1800 and 1820 providing further strong overhead resistance.
The 1680 level is now critical support for gold and if this level is broken, 1600 becomes the next target.
Equities continue to grind higher, fuelled by unprecedented amounts of financial stimulus and liquidity and record low interest rates and continue to make all-time highs on a regular basis.
After a pullback last month that tested support at the 89 day Moving Average, the Dow is currently at 35250, yet another all time high, whilst the S&P 500 continues to make all time highs on an almost daily basis. The index is currently at 4432, a new all-time high.
Oil prices pulled back to $64 after making new multi year highs around $76 a barrel at the start of July, forming a double bottom. We expect the price of oil to resume its rally, with our current target $80.
In gold, support can be found at 1675-1680, 1650, 1610, 1560, 1500 and 1485. In the medium term, we now consider further gains in the gold price and a move towards 2350 to be highly unlikely this year, though a strong rally next year remains possible.
Short term resistance can be found at 1737, 1750, 1766, 1790, 1800, 1810-1813, 1820 and 1833. Gold needs to regain the key level at 1833-1840 to give the bulls a chance to rally back towards the all-time highs above 2000.