Gold bounces into 1285, but appears poised for another round of selling ahead.
Retest of 1280
In the June 3 edition of the Opening Print (Gold Sees Expansion, Approaches First Target) I wrote: “watch 1237.50 to 1240 for a potential bounce, as responsive buyers will look to defend this zone in an attempt to return price back to the bottom of the April price range at 1268.50. Should price rally into the 1268.50 to 1280 zone, look for signs of absorption, as this area offers another selling opportunity with downside targets at 1256.50, 1237.50, and 1206.30.”
Gold futures [CBT: ZGQ14] went offered through prior value at 1293.70 before the sell-off into the 1240 level, which held firmly as support. As a matter of fact, Gold eventually rallied off 1240, reaching our 1280 key level and the bottom of value of the prior range at 1285.70, and immediately went offered upon first test during Monday’s session.
I wrote about this potential scenario two weeks ago, and now that it has come to fruition, I’ll be looking for signs of increased selling pressure ahead, as responsive sellers will be looking to defend the bottom of value of the prior range in an attempt to seek new lows ahead.
Gold has also formed an LVN between 1280 and 1285, which clearly illustrates the market’s rejection of this zone, as was the case during Monday’s trading. If sellers can keep a lid on this price zone, another key markdown could be seen in Gold ahead.
Watch Value at 1256.50
If sellers are able to defend 1280 to 1285, look for the market to retest value at 1256.50. Sellers must be able to take this price offered if new lows are to be seen. If so, look for another test at 1240 support, with a shot to complete our original idea of reaching the 100% expansion target at 1206.30.
Keep in mind, buyers took 1256.50 bid recently after defending 1240, which means they’ll be looking to defend value upon the first retest in hopes of returning price to prior value at 1293.70.
Overall, Gold has been extremely bearish, so any rallies should be seen as selling opportunities until price can re-establish acceptance above 1331.
Cheers!
Frank Ochoa
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