the thing thats bothering me, when everyone is buying the big boys normally sell. also most of the traders have loaded up on calls and who writes those calls? I believe this is a shakeout, banks can't allow PM too go too high ATM with the number of calls sold by them. The levels to watch are 1898 and 1885. A drop below these levels is going to be negative for Gold in the short term though I still believe in the gold story in the medium and long term.
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also seeing a long overdue bounce in DXY and yields and coincidentally both are negative for gold.
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with this drop my prediction seems to be coming true. now we need to see how it reacts near the 1885 area before deciding our next course of action.
PS: further downside is accepted as DXY's bounce has not run its course and the bounce is expected to be major.
PS: further downside is accepted as DXY's bounce has not run its course and the bounce is expected to be major.
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Since I consider myself to be a trader I believe it is important to keep oneself open to all possible scenarios and there are two possible scenarios in play here:
Scenario 1: This is the one that most people believe is the one in play that we are in an uptrend which retraced to 1765. In this case the current drop should fizzle out in the 1840-50 range before going full bull.
Scenario 2: is one which very few people are considering is that we are in a downtrend which retraced to 1959 recently and the current drop signals the restart of the downtrend. In this case we could easily drop below 1765 and make new lows.
Which scenario is the correct one only time will tell but as a trader I will keep myself open to both possibilities and try not to box myself into a loss making scenario.
Scenario 1: This is the one that most people believe is the one in play that we are in an uptrend which retraced to 1765. In this case the current drop should fizzle out in the 1840-50 range before going full bull.
Scenario 2: is one which very few people are considering is that we are in a downtrend which retraced to 1959 recently and the current drop signals the restart of the downtrend. In this case we could easily drop below 1765 and make new lows.
Which scenario is the correct one only time will tell but as a trader I will keep myself open to both possibilities and try not to box myself into a loss making scenario.
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as gold drops the 2nd scenario is looking more and more likely, we have a $67 drop and no sign of any buyers. 1840 is the last support I see for the 1st scenario and if that breaks 1720 is no longer a pipe dream. Having said that Golds recovery could also be very fast as the fundamentals remain strong.
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today will be crucical to decide the trend as a daily close above 1840 will signal bulls regaining control and an intraday hourly close above 1865 will also imply the same. if close below 1840 then a retest of 1765 and a possible low of 1720 is on the cards and this will be in a matter of days. however since i believe the gold story is not over reaction at 1800 is also to be watched.
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As I have said before, overall I am bullish on Gold and that is the reason why inspite of rising T yields and DXY, Gold did not crash yesterday. Having said that I would prefer to wait and watch before buying again as the above 2 factors can easily send it for one final leg down. So its better to either keep a tight SL and let it ride or exit from the market and re -enter when there is more clarity.
PS. I am using a tight, in the money SL
PS. I am using a tight, in the money SL