Last week I looked in an integral support evaluation asking if Gold prices can break down. That happened the day after, but already Gold costs are perking back up.
At this point Gold prices are testing resistance at previous assistance, keeping the door open for bearish scenarios. But there's a counter-point on the opposite side of the matter, which circulates right back to the USD.
The analysis within article relies on cost action and chart formations. To learn more about cost action or graph patterns, check out our DailyFX Education section.
Last week brought a fast rush of selling into Gold costs that helped to set an original two-month-low. This was accompanied by a subject of USD-strength even as the risk-on movement drove asset costs in several major markets. Gold, and Silver into a lesser extent, were noticeably absent from this risk-on participation. Friday brought a reprieve, helped along by some softening in the USD, and Gold bulls have continued that late-week dip up to now to the start of the ancient week.
The major question here is if this is only a pullback re-loading for one more tide of bearish price actions; or if that evaluation below 1800 indicated some sort of capitulation from Gold bears.
The current zone of immunity comes from an intriguing spot on the graph that's previously helped to set some support in mid-December of last year, and then again in mid-January of this season. This zone runs from 1825.31-1836.87, and is constituted of two different Fibonacci retracement levels from two different major moves. The latter of these prices is that the 38.2% retracement of this March-August major movement; while the former of these levels is that the 61.8% retracement of their June-August major move.
GOLD MOVING FORWARD -- TRACKING THE USD
At this point, the reverse correlation between Gold and the US Dollar seems to be back in order, revealed on the lower-portion of the below graph. And given that the US Dollar has up to now spent a lot of the year in a counter-trend manner, it appears as though a big driver on Gold is going to be USD functionality.
At this phase, the US Dollar has pulled back to test trendline support from previous immunity. A hold here will keep the door open to get a more profound breakdown in Gold, punctuated by the lower-high immunity at prior support following the breakdown in the symmetrical triangle pattern.
But if USD bears return with gusto, very similar to what was observed at the back eight months of last year, Gold costs could surprise to the upside and given the recent evaluation below 1800, logically speaking, at least some of these older positions with stops corrected to or about emotional amounts are going to be out of the market.
