Gold: 1,365 Support Broken

Sometimes markets just perform beyond your expectations. Gold was already looking bearish following the break of 1,385 yesterday, but we thought that it “would be hard” for 1,365 to be broken in the short run as Stochastic readings would have been within the Oversold region when the 1,365 – 1,375 consolidation zone is breached. It seems that we got 2 out of 3 correct: prices did trade lower towards the 1,365 – 1,375 zone, stochastic readings were Oversold when that happened, but surprisingly price did manage to unlock the “Hard Difficulty” achievement by slicing through 1,365, reaching a low of 1,358 yesterday. 

Prices rebounded after hitting the 1,358 low, sending us back up to around 1,365. This give us the ideal short-term bearish scenario described yesterday – where price will consolidate under 1,365 before finally pushing out lower which will help to extend the bearish reversal pattern seen on the Weekly Chart. 

Hourly Chart

  XAU/USD

All this sounds wonderful, doesn't it, but bears shouldn’t pop the champagne just yet, as bulls haven't rolled over and died. Prices pushed sharply lower following Obama’s official address to the American public on Syria. He indicated that diplomacy is the preferred route, and therefore he's postponed the Congressional vote for military involvement. Furthermore, even if diplomacy failed, Obama promises that no “American boot” will land on Syria, implying that there will not be a long, drawn-out messy war, but merely surgical strikes against chemical weapons storage/production facilities in Syria. 

The resulting decline in gold was promising, with prices pushing below yesterday’s swing low. But unfortunately for the bears, a new bearish cycle did not take flight, with bulls sending price quickly back up towards 1,365 once again.

Nonetheless, overall bearish pressure remains strong under 1,365. Price is currently being pushed down lower again, and with Stochastic readings being higher than yesterday’s levels, we have a broader space for the current bearish cycle even if we start moving lower from here. Ideally we should see Stochastic readings push up further--higher within the Overbought region before heading lower again, but that should not impede the bears' ability to move towards the descending trendline and finding support around 1,330 – 1,345 in the short-term.