The 1225.50-23.50 zone will be key this week. A move above it could lead GOLD further up to 1245-43 or higher to the 1257-62.50 area. It could have a strong momentum breakout move if the equity market pulls back to last week’s low.
So far GOLD remains inside its second bear flag on the weekly chart. As long as the price doesn’t go above 1266.50, it is still possible for a third push lower toward 1075-1032.50 to occur later.
However we are focused on last Friday’s move in the equity market. If the equity market fails to hold above its psychology support level (2000 on $SPX, and 17K on $INDU) it could lead GOLD higher as investors seek a safer short-term investment.
GOLD is in the last stage of a correction wave. It could end the declining move anytime. Shorts should only play in an ultra-short-term frame. Most traders should focus on the buying side even though the price may go lower toward our final downside target.
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GOLD refused to break below the low of the last week of 2014. It was showing strength on the first week of New Year. It gained about 35 points in the first two days of the week, never dropped back below 1200, and closed at the high – nothing spectacular, but a good solid gain for the week. Note how initial resistance become support once it is broken.