Gold rally liable to suffer pull-back

Price at time of writing – $1403.

My recent update on gold in May, with a follow up in early June, recommended selling the metal short, with a downside target price defined at $1275.

In the event, the price dipped beneath this support, eventually achieving a low in late June at $1180. As a result, my recommendation reverted to neutral.

The subsequent rally from this low has taken gold up by a Gann-theory-derived 16.66% thus far, and it remains to be seen whether this rise is sufficient for now. In the short-term, the rally is likely to falter at either the current level, following this 16.66% rise, or at $1475 following a rise of 25%. Furthermore, this recent advance has taken the price back to the rising 12x1 time-angle (derived from the low in October 2008, and displayed on the chart in red). This, too, adds weight to the argument that a pull-back may be approaching.

Although gold has a long-term target band defined as $2548-2585, the higher risk currently involved in the trade does not suggest now is the time to buy. The trigger point for this trade requires a break above $1720. Meanwhile, traders may buy gold on any pull-back to the support at $1280.

Recommendation: neutral. Short-term traders may buy on a pull-back to $1280. The target then becomes $1574.

Gold bullion chart

 

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