Originally published by AxiTrader
Key Takeaway
Earlier this week I wrote that gold was looking vulnerable.
At $1234 this morning gold has now broken down and through technical support and the price action suggests prices could go lower still.
$1219 is first target, with $1212 the 38.2% level of the December/February rally.
What You Need To Know
One of the stranger things about the recent gold rally which took it to a high around $1163 earlier this week was that it was rising along with the US dollar, US interest rates, and stocks.
Trying to understand that in a fundamental sense was relatively difficult unless you take the view that gold is a hedge against uncertainty. So traders and investors were just buying some insurance after Donald Trump's first days in office seemed so fractious.
Certainly also gold was mapping out a nice technical move - respecting trendlines, pullback levels, and Fibonacci retracements and projections.
But two things seem to have combined this week to undermine gold and suggest it could continue to fall, perhaps under $1200.
The first has been the market's recalibration of the chances of a Fed rate hike this month and what that has meant for the US dollar and US interest rates.
So it appears that gold has been unable to resist this big move which has seen traders reshape expectations of a March FOMC hike from 25% last Friday to almost 80% this morning.
But the other big factor, one that suggests gold's fall may accelerate, was the remaking of president Trump, and the apparent reset of his presidency, during his address to the joint sitting of Congress during the week.
This is a behavioural observation myself and many have made. President Trump, well, just looked and sounded presidential, during this address. As a result, some of the uncertainty, and fear, that may have been helping gold resist the moves in the US dollar and US interest rate markets washed away.
So gold today is sitting at $1234, underneath the trendline that stretches back to the start of the most recent rally in December last year when gold was trading in the low $1120 region.
It's also worth noting again that gold traded above the 200 day moving average at $1261 earlier this week making a high around $1263. That's important for many traders as I highlighted that failure earlier this week also.
As you can see this isn't my usual messy chart with moving averages and Bollinger Bands on it. It's just has a simple trendline and some oscillators on it so I can get clarity, and hopefully convey clarity.
Naturally $1219/20 has been important resistance and then support since Decemberr. Below that $1212 is the 38.2% retracement level of the December to February rally.
That's the one I always call the garden variety pullback.
If that level breaks then next support is $1195/1200 and below that $1180.
Tonight's speeches from Janet yellen and her colleaghues from the Fed are important for gold as much as any market right now.
Have a great day's trading.