Basically gold has just corrected back to its rising 200-day moving average ($1,262). Yes, gold did shoot over to the downside but this important moving average should act like a rubber band and is already stretched. As well Gold now is getting pretty oversold on its weekly chart for the first time since last December and it has reached the weekly lower ($1,248) which is usually a very strong support on the first attack.
Therefore a bounce could quickly bring gold back to the falling 18-day moving average ($1,299). Even a recovery directly back to the 50-day moving average ($1,319) would be possible. But from a rational perspective gold likely will need more time to digest this pullback.
What would increase the odds for the scenario?
- Gold can quickly recover above $1,300
- Gold above $1,325 would be extremely
- Gold can at least hold above $1,240 and especially above $1,220
- demand for gold remains strong
- Next report shows strongly reduced commercial short position
How can we make money in this scenario?
- Continue with our strategy
- Buy this dip in gold and the mining stocks
- Be aware that we could see a bounce followed by another sell off followed by a sustainable rally towards $1,500
In the bigger picture the midterm price target around $1,500 - $1,530 until spring 2017 will be active again should gold move above $1,325.