Gold summer doldrums return after two-year hiatus

Posted by Davis Erfle,

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Two weeks ago in this space, I mentioned the $1850 level in gold had cleared the upside on a monthly closing basis and successfully back tested its breakout. The $1850 level at that time coincided with the upper boundary of the downtrend channel from its all-time high at $2089. Once the downtrend line at $1850 was cleared last month, the gold price appeared to break out of a symmetrical triangle to the upside.

At the time, this signified the likelihood that the rally from a daily double bottom in late March had moved into a higher gear. Bullion had also broken through $1900 on a monthly closing basis and the next level in its crosshairs was the January 2021 high at $1960. But the gold price quickly fell back into the triangle during a sharp decline last week, and now appears to be headed towards its uptrend line near $1700 that has been in force since late 2018.Last Wednesday provided the catalyst for an over 6% reversal, when the Federal Reserve jawboned a stop-loss run of a $150 waterfall decline to strong support at $1760 in Gold Futures. A subsequent oversold bounce on Monday was quickly reversed before reaching the all-important $1800 level, which has become strong resistance once again.

All it took to run the stops below $1800 in gold was for the world’s largest central bank to go from “not even thinking about thinking about raising rates” to “thinking about thinking about raising rates” at the June FOMC meeting. Click here for full article.