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Gold retrace to 200 day moving average underway

Commentaries & Views

Gold has gone on to retrace some of the losses from the heavily oversold condition we identified yesterday morning on the 4-hour timeframe. The obvious place for the retracement to top out is in the $1,842-45 area. The chart below shows the 200dma (orange), which was support and will likely now provide some sort of resistance. Of course, gold could overshoot and hit that round $1,850 number, but participants playing this bounce should exercise discipline in taking profit, in this trader's opinion.

Zooming out to the weekly chart below, shows that gold bulls are still defending a longer-term bottom trendline. A breach below would spell trouble for longs, however. If Bulls can keep gold in the mega consolidation pattern between the bottom trendline at its all-time high during this interest rate cycle, into an eventual reversal to dovish policy, an upside breakout possibility remains intact for the foreseeable future.

All eyes on the FOMC today: With 75bp “priced in,” the fed may “surprise” dovishly, providing impetus for a relief rally that could last until the reality of what it takes to break the back of inflation kicks back in.

Stay very nimble.

Thanks and have a great day,

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