Technical Outlook:

December Gold Futures: In our last report, we pointed out the daily chart was sending signals that the gold rally was beginning to look toppy. On October 14, a “shooting star” candle pattern emerged and followed with a “bearish engulfing” pattern the next day. The RSI was running overbought and showing clear negative divergence, a sure sign to, at the very least, lighten up on the long side. The result: the market rolled over and is in the midst of its first significant correction since breaking out from the old record highs at $1,265.00 in September.

Fast forward to today, October 22, the market is in a 6-day downtrend channel and approaching a key daily uptrend and the 38% Fibonacci Retracement level of the 1,160 to 1,388 uptrend combining to form a Support pocket at 1,307 to 1,300. This would be an ideal range for shorts to take some risk off the table as bargain hunters will be looking for a solid area to get long. Nevertheless, my current outlook is Bearish with an expectation for any rallies from here to falter around the 1,350 area, offering fresh shorting opportunities in anticipation of a larger correction to 1,285 to the key breakout at 1,265. The 50% Fibonacci Retracement level of the above mentioned uptrend is at 1,270 and the 62% Fibonacci Retracement is at 1,246 which would be an extended objective.

Buyers looking to put on longs inside the 1,307 to 1,300 Support pocket should look to take some profits around the 1,350 Resistance target. A suggested Stop/Loss would be below 1,295 to allow for some slippage. It will take multiple settlements above 1,350 to neutralize the current Bearish outlook and possibly renew Bull trending forces for a reactionary move against 1,400.

Daily Gold Chart:

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Weekly Gold Chart:

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