Technical analysis: Gold retests the broken downtrend

Technical Analysis

Author: Adam Button | gold

Gold finds technical support in sharp retracement

Gold is down $33 to $1205 as the US dollar catches a broad bid despite a holiday in the United States.

What do the technicals say?

The broken gold downtrends from the March and January highs comes in at $1203. The low today is $1202.28.

In any technical breakout, there is often something called the 'buyer's remorse' where it goes back and retests the critical line that gave way. That's especially true in a parabolic move like gold.

Here is what I wrote last week as gold was surging to a one-year high.

"It's always tempting to close out longs on a big spike after a 10-day jump. Short-term traders might want to do just that.

It's up 18% in 40 sessions and the most overbought since 1999 with the daily RSI at 85.5.

I've been in this trade since Jan 20 and I think gold can go much higher. With the downtrend out of the way, the next stop isn't until $1310. I suspect we will see a retest of $1205 before we get there, so that's where I'll be looking to add."

We're back there now. There is a good argument to scale back in here and I think that will eventually pay dividends but a very disciplined trader might want to wait until close to $1191. That's the October high. The 38.2% retracement of the 2016 move is just below at $1185.

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