Update: potential spot gold trade

Yesterday I suggested selling gold on rallies back above the $1,200 level and the trade idea was initiated at $1,204.

Source: Bloomberg

Following on the initial potential idea, the precious metal got a kicker from a sharp pullback in the USD and a recovery in key emerging markets. This has seen gold lunge into the resistance zone, where sellers could be lurking.

While there is a possibility this near-term reversal will continue, momentum remains to the downside, with downtrend resistance in place and having held since August. There is a significant resistance zone all the way to $1,220 – the reason why I have selected to place stops above that level. Initial potential targets will be to recent lows, which matched December 2013 lows in the $1,183 region.

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