Gold trades off $28 so far today or 2.16% to 1268, a three-month low and 5% or so from the three-year closing low of 1204 set on June 26th.
The metal fell more than 1% in less than a minute at 8:42AM, reportedly, on one large trade and the CME Group very briefly halted trading.
While there is no end to hindsight attributions by analysts, the media and traders focusing on factors from the apparent thawing political angst to rumors of "a major fund rebalancing," here's what we do know and it is very simple really - the price of gold is dropping.
Instead of glomming explanations onto events to see what might stick, let's check in with technical analyst, Andrew Kassen, who is much more interested in discerning future prices than rationalizing past ones.
Andrew posted the below chart on Tuesday, noting that a break below the 1280 neckline of a bearish head and shoulders pattern that his been forming for 4 months would suggest a measured move to the 1110-1125 area. That's another 15% from current levels.
While it's so easy to pin an arbitrary narrative on this morning's price action, all we really know is that the price of gold futures broke a major technical support level at 1275-1280. Until we trade above 1280, momentum will tend to the downside.
So there you have it. Instead of guessing at what might be going on here, we have a firm price analysis that will allow momentum traders who want to play the move a clear cut target around 1125 as well as a built in risk management with a stop back above 1280. Thanks Andrew!
- Basic Materials Industry