First, for anyone unaware of who Paul Volcker is: https://en.wikipedia.org/wiki/Paul_Volcker
We mentioned last week that we thought it might take a Jerome Powell "more hawkish than is currently expected" to break gold down from its two-year major support. The FED received an impetus to perhaps "shock" markets with a hawkish tone at its upcoming September meeting by way of hotter-than-expected core inflation data released yesterday.
The below is a very speculative look at what may be in store for gold should major support at $1650-85 break down and a cascade-like sell-off occur.
Notice that the weekly stochastic RSI failed to turn all the way back up into the overbought area, with the next Fed meeting as a quickly approaching catalyst. We are not saying that gold will break down; we are simply imagining possible scenarios based on evolving market conditions and technicals. And if the FED ramps up and follows through on an increasingly hawkish path regardless of collateral damage in other asset classes and the labor market (which would ensure the opposite of a soft landing); then the probability of such a bearish scenario playing out in gold should merit equal attention.
*Note that in the most bearish case this trader can currently imagine, lows are well higher than that of December 2015.
Thanks and have a great day.
