Gold prices retreated back below 1,400 after UK lawmakers voted to stay away from the Syrian unrest. With this vote, US lost a long-time ally and may be forced to enter into Syria alone, if they are even allowed to in the first place. Without the support of United Nation, US will be launching an illegal strike against Syria (not that US will be too preoccupied with the legality of the issue, as this would not be the first time US enters into a war declared illegal by UN). These reasons decreased the already low likelihood of US engaging Syria using military action soon, especially when we consider that the latest claims of chemical attacks are not new. Hence we cannot say that we’re truly surprised that market is currently pricing in a lower likelihood of a war scenario, as the initial reaction reeks of knee-jerkiness and over-paranoia.
This resulted in Gold prices pushing lower, breaking below the 1,400 round figure support. More importantly, this week’s candle will be forming a Gravestone Doji if we end this week around current levels, or an Inverse Hammer bearish reversal signal if we trade lower further. The other technical signs are not looking good either – we can interpret this week’s price action as a bearish rejection by Channel Bottom, while Stochastic readings are entering the Overbought region, suggesting that a bearish move may start soon if not already started. Even if we assume that price is able to push higher from here and back within the Descending Channel, it is hard to shake off the overall bearish bias, and price may find Channel Bottom hard to breach especially since Stoch readings would be heavily Overbought should that happen. All in all, current bull run can only be viewed as corrective in light of the decline since 2012 September.
Hourly Chart shows the same bearish bias with price breaking the 1,405 support. Price is also hinting of breaking the descending Channel bottom, which opens up immediate bearish target of 1,390, the floor of consolidation zone found on 24th August. should price break below 1,390, this week will end in red, giving additional bearish pressure.