CFDT: Gold (XAUUSD) Falling Below $1000 Is More a Question Of ‘When’, Not ‘If’
Gold is moving closer to developing a very large triangular pattern which would signify the beginning of a move towards our long-term target under $900 per ounce. In the short-run, a move to $1150 is the objective before possibly finding support.
If the larger triangle is to mature then gold should continue its fall from grace no later than the end of July. By fall it should be sub-1000. The size of the triangular pattern points to around $975, however, we believe it has potential to drop even further below $900.
How will this play out with the Dollar? Looking over recent history, it won’t matter as much as many think. Since the lows created in gold back in November the Dollar is a good bit higher, and guess what? Gold is also trading higher as well, albeit by a small margin. The correlation between the two during that time is a paltry 3%. Heck, not even a negative value as it should be. So much for the all-too-much-discussed inverse correlation. On that note, we will do as we have been – trade gold on its own merits, the Dollar likewise.
It’s possible that once gold is ready to make a strong move the anti-correlation will come back into play, but that is to be witnessed not predicted. After all, gold did manage to rally nearly $200 from November to January while the US Dollar Index tacked on an impressive 8%. Again, so much for the correlation. Enough about that…
On a sharp decline in gold, other precious metals – silver & platinum – will not be spared. If anything, given their relatively weak stance compared to gold they are likely to lead the carnage.
Now, to keep biases in check, should the triangle develop and ultimately break to the upside we must consider the idea that it could be signaling a rally of significance. However, as long as it stays contained within the current constructs and moving lower we will not worry about the possibility of higher prices at this time.
From a shorter-term perspective, precious metals are a sector of the market which look, dare I say it, safe to sell on rallies until further notice. $1150 is the next targeted objective. From there a bounce could ensue which will further tighten the apex of the triangle. We will look for opportunities to sell that rather, too, should one unfold.
Prior piece written regarding the bearish potential in Gold:
