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.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.