What goes up must come down (even if it is only a retracement)
At the start of the week I was talking to some traders and said that that gold's recent highs could be vulnerable. It was simply for the reason that market's don't move in a straight line and the pullback that comes will often be violent.
This turned out to be the case with gold experiencing its largest daily drop in 7 years. This got a number of traders panicking. You may be one of them. It is at times like these that the use of leverage can really hammer a trader. So, if you are sat underwater and feeling dazed this post is for you. Here is what you need to know.
1. The bullish case for gold remains in place. Interest rates are low. Real interest rates are negative and when/if they drop gold prices rise. This is the chart you need to focus on for the near term path for gold.
2. The pullback in gold is a normal pullback to the 50% Fib from June's lows.
3. If you are under water gold's bull market it still in place and near term stops under the $1880 region can be considered now that we are seeing US10Y bond yields pull back from their recent moves higher.
4. To re-enter this market look for an intraday trend line break higher as price/if price starts to consolidate from here.
Finally, if you did get hammered by this move in gold learn that violent moves higher are often accompanied by violent moves lower.
