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Gold Licking Its Wounds

Commentaries & Views

Last week’s close: Settled at 1299.2, down 16.9 on Friday and 33.6 on the week

Fundamentals: The bloodbath continues as Gold has shed another 1% from Friday’s settlement. The more than $50 correction from its high in short order is a stark contrast to what has been a very healthy uptrend since November. Although it is too early to say whether there is a larger failure in development, the more perplexing issue is, what was the catalyst? The Dollar Index only gained minor ground in the back half of last week and the Chinese Yuan was fairly quiet. The largest moves though came from sovereign debt yields around the world as U.S, German and Japanese yields all gained significant ground through Friday; a rising yields are a detriment to Gold and specifically so when slipping yields boosted the metal. Today’s economic calendar is fairly light with ISM NY Business Conditions due at 7:45 am CT and Construction Spending due at 8:00 am CT. Please read our Tradable Events this Week to dive deeper into this week’s calendar that boasts Nonfarm Payroll on Friday.

Technicals: There is severe technical damage that got significantly worse ahead of the weekend. Here, on Friday, we said, “We can no longer say that Gold has done nothing wrong,” after it broke below the trend line from November. However, trend lines are meant to be broken and what matters now is how it reacted in the aftermath. Friday’s reaction was poor and price action now faces a strong wave of major three-star support at 1273.2-1280 which aligns multiple technical indicators with lows from January; a close below here will open the door to more selling. We must see a close above 1291.3 in order to take a small step towards neutralizing this immense near-term weakness.

Bias: Neutral/Bullish

Resistance: 1298.1-1299.2**, 1304.7-1306.5***

Pivot: 1291.3

Support: 1273.2-1280***

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