Citing its near-4% decline from the highs and exhaustion candles beneath its lower Keltner, we highlighted Gold’s potential to mean revert last week. Having rebounded 2.4% from its low, we suspect a corrective top could be in place.
Key points:
- March tends to be a weak month for gold, looking at its seasonal averages
- Gold’s performance typically deteriorates throughout Q1
- Near-term bias remains bearish below 1311.34 – 1314
- Longer-term bias remains bullish, so medium term outlook is pivotal around the $1275 area
Part of the rationale behind a deeper correction was the shift in momentum from the 1346.77 high and how it differed from the previous two corrections.
Previously we said noted:
During this decline, momentum has been dominant on down-days and, as this appears to be the first wave or a correction, we see its potential for it to crash lower still. However, we suspect gold is in for a bounce higher before continuing lower.
Now the bounce has occurred, a bearish engulfing candle (using the open-to close) suggests a swing high could be in place. Moreover, it reinforces the previous comments as the three most volatile sessions have been bearish since the 1376.77 high. Whilst this doesn’t rule out an attempt to break to a new cycle high, we favour the current bounce as corrective and for gold to head for the 1276.84 low on a technical perspective