When we looked at gold last April, we saw upside potential to 1380 [see: Update on GC: Apr 8, 2016.]

If it breaks above 1246, then the purple .618 at 1257 is a gimme.  From there, we have potential resistance at 1270, which is also about where the purple midline currently resides.If it breaks above the purple midline, then 1379-1380 is the next logical target, perhaps in Sep/Oct.

Gold got to 1377.50 last month, and hasn’t been able to push higher since.  Here’s the same chart as last April, with the chart patterns and price action extended to today.

It’s trading right now at 1325, about 4% shy of our target.  Does it still have the potential to move higher, or were July’s highs it?  And, the Federales‘ comments from Jackson Hole — do they give us any clues as to what to expect?

continued for members…

Bottom line, we should find out in the next few days — not because the GC charts need to be vindicated.  But, because the US dollar is at a critical decision point.  And, I preface all of this with the statement that 1377 is plenty darn close enough to 1380 that the fun might well be over.

Today, the rising purple channel which broke down last week was resurrected.  Not only that, but DX spiked up and closed above the key zone of support that’s been in place since last March.

Stocks have proven themselves unable to rise much without help from the dollar strengthening.  In fact, it was DX’s breakout from the falling white channel that saved stocks from the severe Brexit selloff (the yellow arrow.)

If you found yourself wondering why the Feds have been so hawkish sounding lately, now you know.  They need the fear of higher interest rates to prop up the US dollar, or else stocks will resume their decline.

Where does this leave GC?  Well, when GC shot higher last month in the wake of Brexit, DX rose right along with it.  It was a fear trade on both counts at the time.  Since then, however, it has been a defensive move involving real investors for GC and nothing but a manipulation for DX.

If our analog plays out, and stocks spike higher over the next few sessions, look for DX to lead the way and GC to tumble — if it’s led by currencies.  If CL leads the way instead, which is the more likely scenario, then DX can drop down and backtest its .786 at 93.108 leaving GC to run up and tag 1380-1381.

The one thing the Feds have proven is that they have nothing but disdain for the shiny metal.  It takes the focus away from the dollar’s strength and stability, which is where they need it to remain.

GC has broken below its 10, 20 and 50-day moving averages.  But, its SMA100 is just below at 1295 — pretty close to the yellow TL rising up from December’s lows and the bottom of the rising white channel it rejoined in February (on CL’s bottoming and DX’s plunge.)

And, I’d be remiss if I didn’t mention the huge IH&S Pattern, the neckline of which is the former high at 1307ish.  If TPTB are serious about discrediting GC anytime soon, it’ll involve getting it back below that support.

Stay tuned.