This looks to me more like an overreaction to the down side in gold based off a sort of mini-panic out of the safe haven trades.

From a fundamental standpoint, nothing has changed in regards to the concerns about negative interest rates nor the chaotic nature of the forex markets. While today’s move in gold certainly was certainly unsettling, it should be kept in mind that this market has rallied nearly straight up since January 14 putting on almost $190 in a month. That is one impressive rally!

The setback, though violent, reached a mere 38.2% retracement of that entire move. That is insignificant. I would suspect that if this market were to try to test the 50% retracement level of the recent rally near $1168, buyers would be more than abundant.

The steepness of the rising trendline beneath these lows cannot be sustained indefinitely as that is just too much, too quickly WITHOUT a constant stream of bullish developments. As soon as the market got a whiff of RISK ON movement, the feed pushing the bull higher faded and you got the reaction lower.

We should now see some backing and filling up here while the market sifts through the various news stories that will be coming our way.

I would watch that session low made in the overnight market that stopped just above the 38.2% retracement level at $1190. That was pretty solid support based on the way the market jumped back off of it. It is also the high made last October and thus the REVERSING POLARITY principle was on full display [Former resistance on the way up reverses polarity and becomes support on the way down].

As long as the miners do not completely fall apart, I would expect this region to hold if tested again. If not, and it does give way, that would set up the 50% level near $1168 as the next zone where support can be expected to emerge.

Days like this are bizarre and used to be relatively uncommon in years gone by. Now, it seems like more and more they are becoming the norm. Massive rallies which soon give way to sharp collapses and vice versa.