The selling continues. Gold is now heading towards yet another bearish break as price has now cleared the closing levels of the week of April 17th. With the level broken, the next support gold can look out for would be around 1,320-1,330, which is the range of Oct’ 10 – Jan’ 11 consolidation floor, and confluence with the lows from the week of April 17th.
Stochastic readings are extremely bearish due to the divergence between price which is heading lower vs readings that are heading higher. Looking at previous interim stoch peaks, a fall from current levels to previous trough levels may equate to another 100 odd decline in Gold price per ounce. This will lead us comfortably around 1,330 and then some. Ability to break the 1,320/30 support will thus require bearish momentum to take us beyond what we’ve seen previously. That doesn’t mean that it is impossible, just that price will have a better chance of breaching 1,320/30 if we have some good fundamental reasons to sell gold.
If we recall correctly, the FOMC meeting minutes released in January stated that some voting members expressed favor to stop or taper down QE in mid 2013 to end 2013. 4 months have passed and June is coming. With the Mid Year mark less than 2 months away, this scenario if materialized may be the fundamental reason we need to send Gold prices further down.
Hourly Chart shows bearish acceleration with price breaking away from this morning’s consolidation zone and also breaking the descending Channel. However, be prepared for potential bullish pullback as Stoch readings are already within the Oversold region. Traders should look out for any bearish rejection similar to the one on Weekly Chart to affirm the strength and reach of current short-term breakout.
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