Gold fell heavily overnight as it fell over $40 and broke its $1,309 support level and its 10 month uptrend in the process. So its fitting to take a look at where Gold will be heading next.
I recently discussed Gold Click here where I talked about the jump higher on Yellen's hold decision on rates 2 weeks ago. In the article I highlighted the imminent breakout potential higher, as its strong uptrend and bullish indicators pointed to higher prices in the future.
So to see a sudden plunge in price and reversal of its 10 month uptrend in such a short period is interesting.
Starting with the monthly chart below, I have circled in black the break of trend which you can notice has fallen considerably even though its only a few days into the new month.
Based on the monthly chart the first level of support to reach is around $1,205 an ounce or another $62 away from the current price (shown on the chart). Failure to hold that support level there is another initial support level at $1,170.
If the break of the uptrend to the downside is a false breakout, Gold would have to close above $1,350 resistance level to resume its uptrend. So we will have to wait for another 3 weeks or so to confirm the uptrend is broken on monthly chart.
Looking at the daily chart below the magnitude of the fall is relatively large compared to the average daily moves in price.
On the daily chart I have highlighted the first support level at $1,250 an ounce. If Gold is unable to hold the next support level the following support level is around $1,206.
Since Gold fell over $40 in one day it broke below 2 support levels of $1,309 and $1,293 closing at $1,267. So the previous support level of $1,293 is now its first resistance level. Based on the large fall in price, Gold would most likely test its resistance level of $1,293 over the next few trading days.
For Gold to resume its uptrend on daily basis, it would need to close above the $1,340/45 level to signal it a false breakout to the downside. Given the fact that the probability of a rate rise in the US for November and December is rising, Gold will most likely confirm the reversal of its uptrend and head lower.
Finally I have a video from Peter Schiff, who believes the drop in Gold due to the probability of rates rising isn't warranted. He believes rates wont be going higher and if the FED was to raise rates it would be bullish for Gold, just like the rate rise in December 15 was for the precious metal.
Rounding up the video Peter also outlines the end game for the markets from the FED's actions going forward.
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Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.