Tuesday Gold Report

Buyers came to rescue as the Dollar breached the June/July support line. This corresponded with gold attacking key resistance at $1220. The Dollar reversed, and Gold rolled over.

Technically speaking, the dollar hasn’t declined far enough to support a cycle low. Today’s reversal was likely trend chasers buying support expecting a turnaround. I’m hesitant to believe the cycle bottomed without closing decisively below the June/July support line. If this is just a short-lived bounce, then prices should rollover in a day or two.

Miners completed their bearish engulfing candles. Downside follow-through tomorrow or Thursday will validate today’s reversals. Today’s price action will give the bears the confidence they need to add new shorts. Failing to follow-through and invalidating today’s reversals could establish a psychological turning point. Overcommitted bears will have to cover if miners reverse and turn higher. Consequently, the price action over the next 24/72 hours is crucial.

I still think meaningful bottoms are possible. Gold needs to hold the $1198 – $1200 level in the coming days to support another raid on $1220. Declining below $1198 and closing below $1189.50 would nullify the young uptrend.

Let’s see how miners react tomorrow. If they stabilize and resist the bearish forces, I’ll remove my hedges. If they don’t, then I think we need to be prepared for more downside.

-US DOLLAR- An A = C correction implies a cycle decline to the 93.50 area or lower. Below the 93.00 level and price will likely test the 200-day MA before bottoming. If the Dollar bottomed prematurely, then metals and miners are headed for another decline. To confirm a premature bottom, prices would have to close above 95.66. I don’t believe the cycle bottomed.

-GOLD- The bears defended $1220 well. Gold slipped back to the 10-day EMA. Prices need to hold $1198 – $1200 in the coming days to prevent additional weakness. A daily close below the $1189.50 low would prompt another bout of selling. The MACD firmly broke above the 6-month downtrend line. Consequently, I view this as a temporary 1-2 day pullback in an emerging uptrend.