The precious metal’s annual winning streak was finally snapped with its worst annual loss in over 30 years. The only thing that will save gold will be central bank buying and we may need to see further weakness towards the $1,000 area before institutional investors jump back in. Gold’s biggest problem is that traders are adding equities to their portfolios and reducing their commodity exposure.
As thin markets still remain the case for this week, traders will keep a close eye if the yellow metal can take out the June 28th low of $1,179. Price action on the daily chart is identifying a potential collapse if gold reaches the $1,155 zone, which happens to be the 108.9% Fibonacci expansion level of the B to C leg. If momentum continues to drive gold’s slide, it is at the $1,110 level, we may see some profit taking and a modest bounce.
The trade: Sell Gold at $1,155 with a stop loss at $1,177 and a take profit at $1,110. The Risk/Reward Ratio is 1:2
Happy New Years!
Edward J. Moya
WorldWideMarkets Online Trading