Gold Resumes Correction

A rally in the dollar has taken hold; Silver failed to breakout, and Gold has sliced lower below $1800.

Although I did not expect Gold to break out this year, I recently have been more sanguine about the prospects for a bullish consolidation.

Last week I noted but misinterpreted the correction analog.

The post-rebound decline appears harmless (second arrow), but we forgot a few things. 

The post-rebound decline retraces the majority of the rebound, and it sits around $1800 at the very end of this year. 

Also, because it is an average, it has smoothed out all the volatility of each correction. The average secondary decline (removing extremes) would take Gold below $1675. 

Conventional technical analysis argues similarly that Gold and Silver aren’t breaking out this year.

Gold sliced through important support around $1775 to $1800. It is short-term oversold and should begin a bounce next week. However, we should anticipate a potential test of the spring low around $1675. 

Silver has initial support at $24, followed by a confluence of strong support at $22. 

We’ve argued that Gold is building the handle on a cup and handle pattern and that it would not break to the upside this year. Even in our most recent article, we highlighted the correction analog, which showed Gold would not start moving towards a breakout until the very end of the year. 

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