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Today’s Trading Edge: Gold’s Collapses as the Dollar Rallies on Rate Outlook

Posted by Edward Moya on Aug 21, 2014 9:49:00 AM

WWM GOLD AUG 21 2014

On Monday, I wrote about how downside risks remained in place for the precious metal.  While gold prices remain under pressure, the potential fireworks from Jackson Hole may provide a significant pause in this downward move.  Many may still be short as price has just stabilized around the $1274 area and only $4 away from my first downward target.  Securing profit in advance of the key comments that will come throughout the next couple of days is acceptable.

The reaction to both Draghi and Yellen’s comments should provide whipsawish reactions for the dollar and gold prices.   

My last precious metal post 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. 

The daily chart below shows that earlier this summer, 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.  If the potential Gartley pattern forms around the $1,265 area, we may see an immediate reversal.      

The trade: Buy Gold at $1,265 with a stop loss at $1,245 and a take profit at $1,300.  The Risk/Reward Ratio is almost 1: 2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: gold, technical anlaysis, Federal Reserve monetary policy, Metals


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