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Gold: Stuck in a Descending Path; Will We Ever Break-Out?

A few weeks ago I stated Gold would remain under quite a bit of pressure for the first 14-15 days of October and we see exactly that. Moreover, I further suggested that Gold would trade in a 1489-1517 (on average) range for the first half of the month.

Most people believe that Gold has dropped and will continue to drop based on the potential USA-China deal. However, this is in actuality, incorrect. Gold is in roughly a 2-3 month correction and will eventually break-out anytime near Halloween to the first week or two of November. Gold initially rose incredibly quickly and it is not uncommon for Gold to undergo a stagnant 2-3 month correction before a more steady and consistent rise upwards. For this reason, even if the market has down days it is unlikely Gold and Silver will shoot-up in a big-way, but rather form dead cat bounces off oversold conditions.

While most traders have been optimistic about the recently announced Phase 1 trade deal it is important to note that this phase has not been finalized, written or signed for. In real-world practicality this was a tactical move by the Chinese to keep Trumpy happy to postpone tariffs and they have been successful. Phase 2 and 3 will likely have much of the same back-and-forth uncertainty and tariff escalation as we saw in the last 15 months as time moves forward. For this reason, I am extremely hesitant the market will push the general markets to ATHs, particularly because of the “need” for rate-cuts which may not happen at all for the remainder of the year.
Nonetheless, it should be expected for quite a bit of profit taking to be present in the general markets if the market can re-test a 2992-3000 level.

While in the short-term Gold and Silver will remain under pressure I believe technically, much of the extreme downside has been priced in and Gold and Silver will continue to find support near 1470-1477 and 17.35-17.5 respectively before an eventual rise in the next 2-4 weeks.

The DXY bubble should also start forming larger and more consistent engulfing bear flags and as the DXY slowly starts to move down, this should eventually elevate Gold and Silver somewhat.

– zSplit

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