After price bounced off the 0.236 fib $1460, I pointed out that $1525 would be a key level bears will be looking to protect. We can see price was rejected after testing $1520 forming the long upper wick on the 4 hour candle. I'm going to remain cautious of a selloff from this level. Bullion banks love dumping paper during high liquidity events.
As always, long term I'm bullish. Selloffs will likely be short lived and provide opportunity to enter long.
There are a couple considerations why I'm still being cautious that we might see more downside pressure on metals. The price of gold has been largely driven by risk sentiment. Negative correlation to S&P, positive correlation to JPY, and to a lesser extent affected by strong USD.
1) S&P selling didn't produce a lot of follow through. We see the classic hammer candle producing a higher low and pushing price back above support. Waiting for a convincing breakdown. (Could happen at any time....)
2) DXY selling didn't produce a lot of follow through. Price is still sitting above support. Haven't seen a solid break below support for quite a while now. While not the most important factor, strong USD does put pressure on metals prices.
3) One of the strongest correlations I have been following is the JPY. If we look at a chart of equally weighted JPY index, we see strong resistance overhead. Price has been consolidating around point of control level from previous consolidation structure. Even if we see a break to the upside, it will take a real convincing move to break through and hold above resistance. (Need a legitimate fear driven risk-off scenario)
Weekly view looks like price is setting up for a break higher.....
Final chart shows what happens when fear takes control... The upcoming inevitable breakdown of the system is going to be a lot worse in comparison.
As always, long term I'm bullish. Selloffs will likely be short lived and provide opportunity to enter long.
There are a couple considerations why I'm still being cautious that we might see more downside pressure on metals. The price of gold has been largely driven by risk sentiment. Negative correlation to S&P, positive correlation to JPY, and to a lesser extent affected by strong USD.
1) S&P selling didn't produce a lot of follow through. We see the classic hammer candle producing a higher low and pushing price back above support. Waiting for a convincing breakdown. (Could happen at any time....)
2) DXY selling didn't produce a lot of follow through. Price is still sitting above support. Haven't seen a solid break below support for quite a while now. While not the most important factor, strong USD does put pressure on metals prices.
3) One of the strongest correlations I have been following is the JPY. If we look at a chart of equally weighted JPY index, we see strong resistance overhead. Price has been consolidating around point of control level from previous consolidation structure. Even if we see a break to the upside, it will take a real convincing move to break through and hold above resistance. (Need a legitimate fear driven risk-off scenario)
Weekly view looks like price is setting up for a break higher.....
Final chart shows what happens when fear takes control... The upcoming inevitable breakdown of the system is going to be a lot worse in comparison.