Gold prices are lower for a fourth consecutive day as the rebound with equities and the U.S. dollar continue. The precious metal was also unable to rally after Federal Reserve Bank of Kansas City President Esther George’s comments about a September rate hike seeming less compelling. A dovish Fed is typically viewed as supportive to having easing money in the markets and that could be supportive for gold prices.
In my last gold post, I identified a key bullish reversal pattern once the yellow metal fell to a 5-1/2-year low on July 24th. Price action on the gold daily chart shows point D of the bullish butterfly pattern was targeted by the $1,072.30 low, which is both the 161.8% Fibonacci expansion level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C rally. In the middle of August, price has rallied to $1,169.80 before the recent reversal. It appears that if we continue to see weakness, major support will come from the noted major low, with further deeper support coming from the $1,050 level.
If we do see a return of bullish momentum and price breaks above the key $1,186 level, immediate upside could target the psychological $1,200 handle.
The trade: Sell Gold at $1,133 with a stop loss at $1,143 and a take profit at $1,103. The Risk/Reward Ratio is 1: 3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading