Gold has found support on our trend line but the bounce is not convincing. We are very concerned that gold penetrated our dotted green line with ease. Our previous trade on gold, where we were stopped out, expected one last thrust up near the end of November/ early December. We still believe the timing of this is correct but our view is that the “thrust up” will be a corrective bouce before gold moves back down at some pace. Such a move would nicely correlate with our medium term calculations on gold which show a bottom next year.
Commodities are extremely difficult to forecast and trading them should be done with great care.
Our current forecast shows gold should bounce to between 1814 and 1836 but there is some upside risk towards the solid white trend line (around 1870). This means a short entry has to be managed carefully as the reward to risk ratio is between 3:1 and 7:1. Both are good but deeper pockets are required if you go short earlier and there is no guarantee of the trade playing out.
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