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Analysis

A major bearish breakout in gold

gold

The commodity markets were badly sold off this week as the US dollar soared resulting from a plunge in the Eurodollar. While the commodities are pricing in a recession, growing bets of less aggressive Fed rate hikes boosted a speculative rally in the stock markets. The impulsive risk-on sentiment has sent the safe-haven asset, gold lower, down for the second straight trading day. Now that gold had a major downside breakout on the pivotal support of 1,785, a further selloff is expected in the near term.

Gold - cash, daily NG (Valid for 1-2 weeks)

(Click to see the enlarged chart)

Gold - cash, weekly NG

(Click to see the enlarged chart)

In the daily chart, the base metal now is falling into a descending channel, with the pivotal resistance at 1,785, the day-low seen on 1 July. The open price on the same day can also be seen as a resistance level as gold usually swings widely, which confluences with the Fib. Extension 100.00%, pricing at near 1,808. If the downtrend persists, further support can be predicted by the Fib. Ext. 161.80%, at 1,700. In addition, the pivotal support of 1,657 remain at day lows on 9 March 2021,  30 March 2021, and 9 August 2021, which is the potential neckline support in a weekly double-top configuration scenario.

Fibonacci extension in the daily chart – connects the high on 8 March (A), the first low on 16 May (B), and the lower high on 10 June (C). 


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