Gold broke below a critical support level last Thursday, triggering a wave of selling pressure and driving prices steadily lower, with the metal touching a low of around 3975 on Friday before staging a modest recovery. The daily chart printed another bearish candle after the previous session's large decline.
The 4100 threshold was tested on numerous occasions before finally giving way, and the 4066 level was probed three separate times before it too was breached, kicking off the current round of sharp losses. As noted previously, gold's rebound highs have been progressively lower, and each repeated test of support has gradually eroded its strength, raising the odds of a breakdown. Once the bottom of the trading range was pierced, heavy volume selling followed, which is precisely why successive short positions were initiated on Friday. The focus now shifts to whether the yearly low of 3942 can hold. Given the proximity to that yearly low, chasing shorts aggressively is unwise; instead, waiting for a rebound to complete before considering short positions is the more prudent approach.
On Friday, the plan was to short gold decisively once it rebounded near the 4032 area, a prior breakdown point, and three short positions were indeed executed and closed profitably in live trading. The market presented numerous opportunities, confirming the validity of that strategy. Currently, gold has held the 3975 Friday low on the hourly chart and is bouncing, with upside resistance around 4032, followed by the 4066/73 zone where prior support turns into resistance. Downside support rests at the 3975 Friday low and the yearly low of 3942. The bias for early this week remains to sell into rebounds, while a light long position could be considered if price approaches the prior low.
This information is for reference only and does not constitute investment advice. Investors who act on it do so at their own risk.
Comments