Gold appears to be taking a pause for now, having rallied from $950 to $1020 without stopping to take a breath. However although a pause is healthy considering gold's $70 rise, it must not be prolonged as this will kill the momentum in the move.
Looking at the chart above, it is clear that the technical indicators are signaling further weakness in the gold price in the short term. The Relative Strength Index hit 70 and became overbought, and now is dropping back to more neutral territory as gold slips below $1000 again. Similarly the STO is falling and has endured a negative crossover, as has the MACD. All this equals probable further weakness in the gold price over the short term, before the yellow metal can surge up again.
The most important number here is $1033. We view this as the most critical level standing in the way of golds route to $1200 and beyond. Unless this is broken, and soon, there is a high risk that gold will slip away from the $1000 level – and for the third time it will have failed to maintain prices over $1000 for a decent period of time. That would seriously hamper and future attempts for gold to seriously break above $1000.
We do not think gold will fail this time however. We think that even if we are to see some short term weakness in gold at the moment, this will be followed by a serious surge up through $1033 and on to $1200.
However it may be a good idea to wait until $1033 is broken before buying more positions on gold. At present we are holding our main position in our favorite gold stocks and watching and waiting for the chance to deploy some of our opportunity cash.
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