Gold’s 30-day moving average is now in decline, just the fourth time that has occurred in the past year-and-a-half. That suggests some further minor weakness or chopiness is probable but the long-term uptrend remains intact as John explains in more detail below with an updated chart and analysis:
Gold has solid support levels between $1,140 and $1,180 which should be strong enough to enable it to make a reversal between the parameters.
John: The price of Gold (continuous contract) continued to wallow today in the midst of the summer doldrums, the seasonal period when both bullion and precious metal stocks battle weak markets and the spectre of reduced buying. Gold opened at $1,193, climbed to $1,195 and then drifted to a low of $1,177 before climbing to $1,183 near the close.
Looking at the daily chart we see that for the past 9 trading days Gold has fluctuated within a horizontal trend channel (2 black horizontal lines) and today it broke to the downside and closed at the support band (former resistance) between $1,160 and $1,180 (green horizontal lines). Another support (former resistance) line (green horizontal line) is shown at $1,140 – this is a strong support level going back to January of this year.
The sloping blue line is a trendline that should be watched carefully. When a turnaround comes, the price of Gold will break this line to the upside indicating that a reversal has occurred.
Looking at the indicators:
The RSI(2) is quite low in the oversold region at 8% but can fall further before reaching an extreme level of <2. The horizontal orange line represents the approximate level of previous lows at points indicated by vertical blue lines. This shows we can expect further weakness – bearish.
The Slow Stochastics %K (black line) has crossed down over the %D (red line) and is in the oversold region – bearish.
The ADX trend strength indicator has the -DI (red line) above the +DI (green line) and pointing up. The ADX trend strength indicator ADX (black line) is now also pointing up, indicating that the downtrend is getting stronger. Watch for the -DI to climb higher and peak possibly around the 35-40 level – bearish.
Outlook: The immediate outlook is bearish. There are very solid support levels between $1,140 and $1,180 which should be strong enough to enable Gold to make a reversal between the parameters. The breaking of the blue trend line to the upside should give the first sign of a turnaround or at least a consolidation. Longer-term outlook remains bullish.
