Gold is facing a critical test of support for the 3rd time since mid-July after falling ~3.5% in the last eight trading sessions:
Gold (Daily)
There’s a lot going on in this chart:
- Gold has experienced some minor signs of distribution since July, since Labor Day the distribution has picked up considerably with sellers becoming more aggressive and buyers in full retreat.
- The support/resistance zone $1305-$1310 is critical and it is being tested for the 3rd time in two months. This test also appears to be happening with a sharper downside trajectory and more selling vigor than the last two times.
- The Money Flow Index (MFI) is close to a level (~30) from which bottoms have been put in place in the recent past.
- While it has been relatively subtle, since peaking at $1377.50 gold has been making lower highs/lower lows. A breakdown below $1305 would not only breach important technical support but it would also create another lower low.
If the 3rd time proves to be the charm and a breakdown occurs the first level of interest is ~$1290 with the measured move target from the breakdown projecting all the way down to the pre-BREXIT lows in the low $1250s. A critical week lies ahead for gold and bulls will need to see a rally to at least $1340 to inspire confidence that support has held and that buyers are back in charge.
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