Gold looks ripe for a pullback
Updated
Gold prices rallied nearly 11% over a 3-week period into the cycle highs. Yet the characteristics of its clean, strong bullish move have been replaced with choppy price action since it failed to hold above $2000.
A shooting star formed on Friday following its false break of $2000 to form a lower high on the daily chart. And this was followed by a bearish engulfing day on Monday to show momentum is trying to turn lower.
Given the strength of the initial move, I suspect gold needs to pull back. The highs around $1950 make a ideal initial target for countertrend trade, whilst prices remain beneath Friday's 'shooting star' high.
We can reassess its potential for a swing low if prices pullback and respect support.
A shooting star formed on Friday following its false break of $2000 to form a lower high on the daily chart. And this was followed by a bearish engulfing day on Monday to show momentum is trying to turn lower.
Given the strength of the initial move, I suspect gold needs to pull back. The highs around $1950 make a ideal initial target for countertrend trade, whilst prices remain beneath Friday's 'shooting star' high.
We can reassess its potential for a swing low if prices pullback and respect support.
Trade closed: target reached
Gold prices retraced in line with our expectations, and in a relatively straight line. Gold is now considering a move back above the September high. Take note of the US inflation report, which is likely required to come in soft for gold to print a prominent swing low.
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