Yesterday I posted a video on Youtube outlining my thoughts on gold. Based on the price action that we had witnessed over the last couple of sessions I thought that one of two scenarios could play out:
1. That a new uptrend was being established at a steeper angle
2. That gold had formed a double top and was likely to pull back and consolidate between $1,750 - $1,850 (bullish target) or within the previous channel, $1,500 - $1,650 (bearish target).
Below is a copy of the chart that was contained in yesterday’s video:
Last night’s action was reflective of my earlier analysis as we did see further weakness in the price of gold. As the new chart below shows the price gold dropped down to the new trend line that I had previously mentioned. The lower wick indicates that it did fall below the trend line during the session, however, what is important is that it closed pretty much smack bang on it. As a result of this we now need to see a green candle for this new uptrend to continue. If we see further weakness in the price of gold tonight then the uptrend will have broken down and gold will head lower in my opinion. This then brings my second scenario into play and could result in consolidation between the two price levels outlined above.
Finally I don’t think either consolidation scenario would be particularly bad for gold in the long term. My initial video that I posted a number of weeks back discussed how a parabolic move is not an ideal scenario for anyone who is invested in gold for the long term. If gold was to move back into its original channel then the long term uptrend could continue for a considerable amount of time.
Disclaimer: The above is not advice, just some general thoughts. Please do your own research and consult a licenced financial advisor.
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