Stocks are still making new record highs, Treasuries are once again falling, the commodity currencies are slumping and gold’s picture perfect bearish trend looks for one last leg down.
The daily chart above highlights the 50-day Simple Moving Average (SMA) decline through the 100-day SMA (red arrow points out the crossover), commonly known as the death cross. The bearish stance that we identified two weeks http://bit.ly/1iAQJHV is still very much valid. Initial downside targets include $1,220, followed by a potential retest of the July low at the $1,180 region.
The fundamentals of this trade are also pretty solid. If 10-year note yields continue to climb towards 2.80%, the bearish momentum should remain in place for gold. All in all, this was a decent week for U.S. statistics. Retail Sales and Jobless claims impressed, while the only disappointment came from Philly Fed Manufacturing. Improving U.S. statistics will allow the Fed to begin tapering their asset purchases and this should have a negative effect on gold.
The trade: Sell Gold near current levels ($1,247), with a stop loss at $1,254 and a take profit at $1,226. The Risk/Reward Ratio is 1:3.
Edward J. Moya
WorldWideMarkets Online Trading