Gold sits on support
Gold broke the September lows but is so far holding onto support at the August 13 low of $1479. The low so far today was $1480.75 and it’s rebounded about $3 from the worst levels.
This is a precarious spot.
There has been a rush into gold since the Fed turned dovish and Trump escalated the trade war. That leaves little breathing room for late-coming longs and the potential for a brutal squeeze.
If there’s a positive resolution on China and/or the Fed moves to the sidelines, then expect a breakdown. Even if those things don’t happen, there could be some gold softness on USD strength.
In terms of the chart, I tend to trade the ‘neckline’ of the head-and-shoulders at $1479 in this case, but you could argue for that sloped line as well. The difference is about $6.
Watch carefully at the US equity open because that’s when the selling hits the ETFs. There could be some extra weakness because of the belief that China will be sidelined due to holidays this week.
Finally, note that today is the final day of the month/quarter so flows will be a factor today and for the remainder of the week. Gold gained 5.5% in Q3 in the fourth consecutive quarterly gain.