13 September, AtoZForrex.com, Vilnius – Despite falling stocks across the world, Gold appears to ignore the global recession worries and remains trending to its own direction.
Technically, all the main market measures guide the precious metal lower. Based on price action, downward slopping 50 & 200 SMAs on all the major time-frames, fluctuating in weekly and daily bearish turfs RSI along with bearish momentum from MACD, we could assume a price move towards a major resistance level at 1040.
A weekly candlestick close below an upward slipping monthly trend line would encourage the view.
Moving closer to the action, a harmonic pattern of Head and Shoulder (H&S) has been formed and already confirmed the prior week. In order to fulfil the pattern, the price will need to devalue 200 pips further to reach a level at 1087.5. The point lies just below our monthly conformation trend line.
Historically Gold has acted as a safe haven asset in time of global fears and turmoil. Despite falling
stocks across the globe and the world’s second biggest, China’s, economic engine stalling, the precious metal does not budge higher.
Dating back in price history of Gold and DAX, an inverse correlation appears. Each time the index devalued for more than 2500 pips, an average of 2600 pip surge in Gold followed. However, the latest DAX plunge of 3100 pips had a direct correlation of a 1500 descend in Gold. Could it be that a reverse is yet to come?
One of the preeminent forthcoming events capable of overturning Gold is Thursday’s FOMC interest rate decision. Although a confirmed policymaker reiteration of a September hike would cripple Gold immediately, a probable Fed ignited global chaos would sent investor funds flying to the financial refuge over time.
Personally I would refrain longing gold. Having in mind the current bearish weight and H&S harmonic formation, the best bet would be to short the precious metal targeting the monthly trend line. The trade accounts for some 150 pips.
Should the week close below the deciding line, we could aim to 1080 which fall on a 123.6% Fibonacci retracement zone and finally to the initial target at 1040.
Support & Resistance
R 3: 1177
R 2: Fibonacci Fan 50%
R 1: 1137
S 1: 1090
S 2: 1080
S 3: 1040