Gold Approaches Key Support Zone Amid Complacent Sentiment

Gold has fallen more than $70/oz since peaking at $1287.80 a couple of weeks ago:

 

Gold (Daily)

Gold_Daily_3.25.2016

Gold has traded within a roughly $40 range for the last six weeks – this week’s downside break from the range makes a test down to major support between $1190 and $1200 (rising 50-day moving average, 38.2% Fibonacci retracement, and previous resistance) likely next week. 

While sentiment reached a euphoric climax in mid-February the gold price has dribbled around within a relatively narrow range ($1230-$1270), until this week. This week’s break below support near $1230 is all the more concerning due to the continued increase in GLD assets:

 

GLD tonnes

As McClellan points out, the last time that price began to decline before tonnes of gold in GLD declined the gold price was on the verge of a big fall (January 2015). While the $1190-$1200 support zone is robust, the high level of complacency amid significantly bearish technical developments in gold offers ample cause for concern.