Yesterday we wrote that if Gold broke though 1280 it was in danger of going down to 1220-1240. The low was 1282, gold reversed and bounced hard closing over 1300.
Here is what we wrote:
I can hear the chants of the pundits and gold longs, “that can’t be right” how can gold continue to go lower? The answer is simple, the gold pattern suggests lower prices and market correlations are not absolute at the time they happen. If gold breaks through 1280 on the downside the odds increase of seeing 1220-1240
Monday’s rally signals the lows are in or just another deadcat bounce in a market that wants to go lower. Nothing has really changed, the pattern in gold still suggests that it could break lower which means we are still watching the 1280 level at support and the 1310 level at resistance.
We remain short term bearish gold and never get too excited on a one-day Deadcat bounce. Gold has a lot of work to do to change the trend which is still down. There is a better case to sell the rally, however as we have stated many times MARKETS DON’T ANNOUNCE THEMSELVES.
Sometimes the best trade is the one of observation, for now we watch the 1280-1310 levels and will not be buyers until there is a couple of closes above 1310.