Gold $1,300: A New Hope
Gold is quickly approaching the most important potential pivot point it has faced in more than three months.
If it can clear this hurdle, we could see a quick rally and higher prices over the next several weeks. But if it fails, I suspect another test of $1,200 in short order, potentially sending the yellow metal to fresh lows.
I’m not conjuring this vision out of thin air. Gold has been true to its chart since its decline steepened back in April. If you just take a few seconds to analyze the price action, you can see how $1,300 has become the magic number that could trigger a snapback rally.
This chart has two important traits you need to recognize:
First, round numbers clearly matter to gold. $1,350 provided support after the first major push lower back in April. And just a few weeks ago, $1,200 acted as a floor for the yellow metal after another step drop.
Next, check out how the $1,300 level. It’s another round number that also happens to coincide with a trendline that has acted as an important area of resistance during gold’s decline this year. That makes this an area to watch very carefully—especially after gold’s strong push higher last week.
Last week, gold jumped higher, posting its most impressive run since its post-crash push in April. It’s approached $1,300 a couple of times since Thursday, yet turned lower on each attempt. This morning, gold futures are sliding into the red after another go at the $1,290s. If it doesn’t snap back toward $1,300 over the next week or two, expect another move lower.
Of course, my bet is on failure at $1,300, bringing us one step closer to my $1,000 target. But I can’t let my biases cloud my judgment. Same goes for you…
The one thing that could really work in gold’s favor right now is the fact that sentiment is completely in the gutter. It’s not a stretch to say that gold and miners are currently the most hated areas of the market right now. With everyone on one side of the fence, a snapback rally could spark an intense rally.
Keep an eye on $1,300 this week. A breakout or breakdown at this price will tell you whether it’s time to go long or press your shorts.