The 1261 area represents the 61.8% retracement level of the 2014 rally and a break of this support level will suggest a return to 1180 is on the cards.
The picture now looks bleak for gold, with the dollar strength continuing and equities breaking through resistance to embark on a new rally leg. We expect a short pause and a mild rally from an oversold position before the down leg starts with gusto.
Support can be found at 1261, 1250-1255, 1237-1240, 1220-1225, 1210, 1200 and 1180. A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term, this prospect now looks more likely and we are watching for a break below 1250.
Resistance can be found at 1268, 1274-1277, 1283, 1289, 1293-1296, 1304-1305, 1309, 1314-1315, 1319-1322, 1330-1332, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435. The impulsive breakout above the first down trend line on the weekly chart suggests an end to the intermediate term down trend, however the 65 week MA must be broken before a significant rally can develop.
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