In our March 28 update on gold [see: Follow the Yellow Brick Road] I identified several upside targets that would be in play if GC was able to top its SMA200 — the first being the .618 Fibonacci retracement at 1280.80.

I reiterated it on April 11 [see: Price Alert on Gold] as GC spiked through the SMA200 and approached 1280.

The  purple .618 at 1280.80 was one of several upside targets suggested if GC were able to pop through the SMA200.  It did so once on Apr 7, but quickly retreated below the red TL from last July.  This breakout appears to have more staying power.

As it turned out, GC gapped through the .618 Fib the very next day and spent 7 sessions above it before running out of steam.  It ultimately broke down on May 3, but is at a very important threshold today.

continued for members...

Note that the May 3 breakdown occurred in the wake of DX’s breakdown through the TL that had guided it higher since July 2014.  So, in my opinion, it was probably a defensive measure by TPTB.  Regardless, it dropped only to the falling purple channel midline before getting a bounce.

Importantly, that bounce has taken it right back to the broken red channel for a backtest.If the backtest holds, then there’s plenty more downside to come. The .618 retrace of the rally from 1124 to 1297 would be 1190.  And the .786 at 1161 would intersect with a channel line.  If GC can’t remain above its SMA200, we’d expect one of those to be in play.

I’m not crazy about this scenario, even though the backtest says it makes sense.  I think DX is heading lower than 97.583, and this would suggest higher GC prices.

But, the fact that GC got a nice bounce off the channel midline suggests more upside, perhaps to the falling purple channel’s .786 line.  I originally put the purple dot there where it intersects with the purple .886 at 1348.60 around the end of May.

That would require that GC reenter the rising red channel, of course.  But, stranger things have happened — especially when the underlying is so heavily manipulated in the first place.The alternative is that is continues to climb along the underbelly of the rising red channel, reaching those upside targets in July or later.  But, given the political, economic and military turmoil currently gripping the world, I’d bet it happens sooner rather than later — if it happens, that is.

GLTA.