Back on August 15, we noted that gold was nearing an important downside target.  From Charts I’m Watching: Aug 15, 2018:

[Gold] has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke down in June.  I strongly suspect it will bounce here.

GC dipped slightly lower, bottoming out at 1167.10 the following day, then began an arduous climb that reached our 1268.30 target last week.

As it threatens a breakout, we’ll take a fresh look at the road ahead.

continued for members…

Note that GC has pushed out of the rising white channel and above the purple channel line and .500 Fib.  The next most obvious target is the .618 at 1292.10.  If the breakout holds, it could rally the 1.5% any time.  If it fails, then the timing looks more like mid-February.  That’s obviously a huge margin of error.

The dollar bulls have a very strong incentive to push it out as far as possible.  If DXY breaks down, stocks will suffer.  If I were in charge of propping up equities, I’d make sure that DXY hangs on as long as possible, even making a new high at the .618 at 97.873.That would require USDJPY rebounding (after the white channel breakdown and the purple channel breakdown)……and/or the EURUSD breaking down.  So far it has steadfastly refused to do anymore than backtest (repeatedly) the white channel from which it broke out in July.  And, it sure looks more likely to pop up and tag the SMA200 as it descends into view.But, the central bankers and politicians are clearly motivated, and this is child’s play for the PPT — which hates the idea of gold looking better than the dollar.

At this point, I’d be comfortable staying long, but would use tight trailing stops in case GC suddenly realizes how far out over its skis it is.  If the Fed pares back on the rate hike talk in January, we should see dollar weakness, which could give gold a nice boost.

On the other hand, paring back rate hikes looks an awful lot like easing, and easy money has long been associated with rising gold prices.  As long as gold remains above 1268, I’ll continue to stay constructive on it.

Stay tuned.