Gold’s Mini-Crash Leaves It Oversold, But Vulnerable

I’ve written a lot about the macro headwinds that face Gold. And even though I’m still neutral to bearish on the yellow metal over the next year or so, I’m still a trader… so I’m always looking for opportunities.

So when Gold prices sold off sharply on Sunday night, I did what I always do:  check the charts. But what I found was a difficult setup. The yellow metal had reached deeply into oversold territory (daily RSI under 20 heading into today), but it had also just broken a key support around $110 on the SPDR Gold Shares ETF (GLD) and $1140/$1150 on spot Gold prices.

gold prices chart new lows

Gold is such an emotional asset that many followers fall into one of two camps: perma-bull or perma-bear. But tethering yourself to a belief can be problematic, especially if you are an “active” investor.

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I rarely trade Gold, but I often share charts and technical thoughts for readers/followers. As well, I track it as a gauge of capital flows.

I don’t think the 2 day mini-crash is a great setup just yet for prospective longs or shorts. It needs some time.  For one, the breakdown is still in process and needs to develop into a better setup. Price breakdowns are bearish until proven otherwise and buying early on in a breakdown isn’t a high probability move. Looking at the short side, active investors typically look for short opportunities on rallies that follow technical breakdowns. That said, talk around Gold as an investment is heating up again and will likely continue as it nears the big round $1000 level.

Trade safe.


Twitter: @andrewnyquist

The author does not have a position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.