In June so far, gold (xau/usd) has found support at 1240.50. After putting in a price bottom, traders bought gold up to 1285 today before price retreated.
Trendline, bearish continuation: As gold rallied this month, it approached the apex of a previously broken triangle, which would be in the 1290-1300 area. At 1285, traders also saw a trendline resistance extending from a previous triangle. The decline looks just as strong as the bullish price action it is going against, but overall price action is still bullish as gold trades above June’s rising trendline. A clean break below 1270 could clear this trendline, and signal bearish continuation at least toward 1250, 1240.
If price is supported above 1270, there could still be some upside risk toward the 1290-1300 area, but for short-term traders this would be very little potential reward unless they believe gold has turned bullish. I think a break above 1300 could give the bullish outlook some weight, but for now, the short to medium term mode is still bearish. Therefore, with a bearish outlook, a trader can wait for a price closer to 1300 to fade, or if price breaks below 1270, the trader can either trade into the bearish breakout, or wait for a pullback and short at a price below the 1285 high.
When you look at the daily chart, you do not see any clear direction. While 2014 was bullish going roughly from 1183 to 1388, the 2013 gold market was bearish, with price falling from 1700 to below 1200.
Price is now right in the middle of the 2014 range, and one has to question whether 2014 price action is a new primary move or just a secondary move to the prevailing primary bearish move. I would side on the bearish outlook until the market shows ability to push above 1300. In the bearish outlook, the 1182.35 low on the year would be in sight, but let’s limit it first to 1200.
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