Is Gold setting up for the decline?
Gold has been in focus of many traders as a classical defensive asset. Previously, US stock indexes and Gold have been showing a negative correlation, but not this time.
From my perspective, Gold is setting up for a limited upside breakout or a more massive downside breakout. We haven’t seen any meaningful demand for Gold from current price levels. If you take a look at COT-reports, you would clearly see that the net position of Large Traders and Commercials is balanced. Strategic reversals usually don’t occur in circumstances like this.
Now, let’s turn to daily charts.
Here, we see a couple of key observations. First of all, there was a big bullish day from October 11 with no further participation of buyers. Usually, it means that the move from October 11 was a single-time event. Now, we see what I call the “insecure low” (see the picture below). If the price grows from inside of a trading range, the move might not have enough “fuel” to quickly establish new highs.
What do I monitor right now for Gold?
I keep an eye on 1237.70, which is intermediate-term high. In case price breaks this level and fails to proceed to move higher, I will consider opening a short position with a target below 1200.
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