About a month ago I wrote on gold’s next likely move. Basically, I said that we’d see a short-term bounce off support at $1,350 before the precious metal rolled over and fell further.
And that’s pretty much what happened.
A little Fibonacci analysis shows that, despite their best efforts, gold bugs seem to be out of options.
Here’s a daily chart of gold futures over the last year…
After selling off 15% in just two days, I knew there’d be pause in the carnage. Nothing moves in a straight line.
I saw three likely scenarios, which I laid out on April 19. All called for a bounce higher in gold prices, differences being only in the degree to which gold would retrace its jaw-dropping fall. I was expecting, at the very least, a 38.2% retracement to $1,425. That happened easily.
The next likely upside target was the 61.8% Fibonacci retracement (blue arrow). And we hit that target like a nail on the head. After hitting $1,475 – the target I mentioned on April 19 – gold prices formed a rounded top before falling victim to another bout of selling.
That gold never made it back up to $1,500 – $1,550, my highest upside target, is an important sign that gold bugs are weak!
Watch for further selling over the next few weeks. I’m not ruling out a retest of the $1,400 level, as gold buyers make another run at the bears. Yet, a break below $1,350 should send gold all the way down to $1,225 in the near-term.
Don’t buy into dips… you’d be fighting the trend. Sell into rallies instead.