Gold Near Bottom of Range or About to Break Down?

Talking Points

  • Important timing relationship coming up in Gold
  • Support between 1203 and 1179 looks critical

Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.

Is Gold a potential buy as it trades towards the bottom of the range that has dominated trading over the past year? Cycle analysis suggests it could be as an alignment of timing relationships over the next few days should increase the possibility of some sort of reversal during this period. We think the potential for a turn in Gold is bolstered by recent sentiment data which shows one of the least bullish readings in the metal in recent years as the Daily Sentiment Index or DSI fell to just 5% bulls on Thursday. From a contrarian perspective such extremes in sentiment are worrisome as they so often materialize at the end of moves. Key support over the next few days looks to be between 1203 and 1179 as this zone marks the 78.6% retracement of the December to March advance and the low of 2013. A successful hold of this zone would be seen as positive and set the stage for potential run higher back into the middle of the range. New trend lows after Tuesday would undermine this potential positive view.

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XAU/USD Daily Chart: September 19, 2014

Gold Near Bottom of Range or About to Break Down?

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Week Ahead:

Gold Near Bottom of Range or About to Break Down?

LEVELS TO WATCH

Resistance: 1236 (Gann), 1260 (Gann)

Support: 1203 (Fibonacci), 1179 (Gann)

Strategy: Buy Gold mid-week

Entry: Buy Gold on Tuesday’s close if above 1203

Stop: 1-day close below 1179

Target: 1260

Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter at@KKerrFX.

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