Right Now, There’s A Lot Of Downside Risk To Gold.


investmentwatchblog.com / by Dave / NOVEMBER 24, 2016

Gold fell -21.70 to 1190.30 on very heavy volume, while silver dropped -0.30 to 16.43 on heavy volume.   A strong dollar rally through the previous high of 101.54 was the probable proximate cause of gold’s tumble today; the buck ended up +0.64 to 101.66, but hit a multi-decade high of 101.86 intraday.

The drop in gold/the dollar rally started right around the time of the Durable Goods report at 08:30, which showed an unexpectedly strong new order reading; new orders being the forward-looking reading of how durable capital goods are projected to be in the near future.  My guess is, the commercials took full advantage of the dollar rally to pound gold; the “nobody cares” sense in the west probably caused the recent dip-buyers to panic out.

On the daily chart we see gold plunging through 1200 support; the 1200 level was a very important level to hold, and the close below this level suggests a much more intense decline is potentially ahead.  If the Euro loses the 105 level, that strongly suggests a crisis in the Eurozone, and that projects a much stronger dollar rally and/or a further large drop in the Euro.  Weaker Euro = stronger dollar = weaker gold.  That’s how things stack up right now anyway.

Candle print today is a two candle swing high, which the candle code says is quite bearish: 92% chance of this marking a high.

Rate rise chances have risen to 98%.

Gold open interest at COMEX fell a huge -21,654 contracts.  Commercials are covering, I suspect.

Here’s the weekly chart for gold, to provide some perspective as to why I said the 1200 level was a critical one.   Note that after we lost 1200, all we can see on the chart is a whole lot of air between where we are and the previous low at 1045.  That’s not to say we immediately head there, but that’s where the price will probably go if a new catalyst for gold doesn’t appear, and/or the Euro cracks 105 and the dollar continues to rally.