In our last update [see: Update on Gold, Aug 26, 2016] I noted that GC had come within 2.50 of our 1380 target (from Apr 8) in early July.  After seven weeks of chop, it still hadn’t committed by either tagging the target or breaking down.

The way I saw it, its fate was tied to equities, the US dollar and oil.  If CL rallied, DX could drop and GC was in a position to run up and officially tag 1380.  If, on the other hand, our SPX analog from Aug 3 played out, GC was heading lower.

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… 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.

As it turned out, DX was putting in an important bottom that day that would see it rally 8.4% in the next three months.  GC bounced several times at 1307 before finally plunging below on Oct 4, shedding 14% as of today’s lows.DX recently tagged our upside target at 102.098, leaving many readers to wonder whether this is the right time at which to cover short positions.

continued for members…

First, note that it has spent the last three sessions in the vicinity of the white .618 Fib above.  The .618 is always worth considering as potential support, even when other factors don’t necessarily concur.  And, that’s the situation we have now.

If the IH&S had been allowed to play out, it would have made a great deal of sense from a Fib standpoint, and would have resulted in a backtest of the rising white channel from 1999 as well as fleshing out the falling purple channel.

But, it wasn’t allowed to play out for two key reasons: (1) TPTB needed a stronger USD (increasing USDJPY) to prop up stocks; and, (2) TPTB loath gold.  Gold represents everything that central planners strive to eliminate — untraceable stores of wealth, a real inflation hedge, a real risk indicator.  By breaking the trend, they were able to break the narrative that things are unraveling with the bonus of propping up stock values.

This is why I don’t play gold, and I don’t put much stock into what these charts say. There’s simply too much opposition to it ever achieving large gains.  Not saying it won’t/can’t — but, the odds are against it as long as TPTB have a say in the matter.

With that said, let’s look at what the charts do say.  If the .618 at 1172.40 holds, we could get a bounce back up to the purple midline around 1228 or even a backtest of the broken purple channel at 1280-1300.

If the .618 breaks down, then the next support isn’t until the red TL at 1130, followed by the .886 at 1083.50 and the purple channel bottom at 1010ish.  My gut tells me that the .618 will hold for now and allow a backtest of the purple midline around 1225, then break down into the end of the year as stocks rally.   But, a close below 1172.40 means that’s not likely to happen.But, again, this is about guessing what TPTB wish to accomplish and has nothing to do with fundamentals or normal chart behavior.

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Bonus charts for SLV, which got a nice bounce at the .886 and is trying to hold support at the falling purple midline.  It needs to hold here if it’s going to have any shot at maintaining an uptrend.