Two weeks ago, I identified the key summer range that may contain gold’s summer swoon. Major support would come from $1,280 and critical resistance from the $1,340 region. Both the top and bottom of this range were identified by technical patterns and so far both have held true to identifying the key turning points.
In my last post, I explained how a bullish Gartley pattern was respected around the $1243 area and most gold sellers had to abandon their short positions. Price did extend to our initial upward target of $1,345 and formed a bearish ABCD pattern. The technical pattern has helped price fall all the way back towards $1,286, which is currently where the 200-day SMA trades.
The precious metal had a significant $20 surge early in NY as bond yields pulled back and everyone awaits to see what occurs between both Russia/Ukraine and Israel/Hamas. It appears for now, that the gold has regained its safe-haven reaction and may continue to benefit from increased geopolitical tensions.
The recent rally may find initial resistance around the $1,325 level, with any further upside likely to be capped by the $1,340 zone. To the downside, the $1,280 to $1,300 area will be important and should hold up as long as we do not see yields breakout above 2.70% on the 10 year yield for U.S. Treasuries.
The trade: Buy Gold at $1,308 with a stop loss at $1,298 and a take profit at $1,324. The Risk/Reward Ratio is around 1: 1.5
Edward J. Moya
WorldWideMarkets Online Trading