Gold retested June lows today after the precious metal experienced a pullback yesterday on rising volume. Gold is presently filling out its right shoulder in what we view as a head and shoulders pattern. Our 2nd tier uptrend line serves as the neckline, so the precious metal is certainly testing the waters to the downside. The EUR/USD is exhibiting a similar head and shoulders pattern, making gold’s all the more relevant due to the positive correlation between the two.

Meanwhile, gold registered larger volume to the downside for the 2nd time in a week, showing bears are making a push for a downtrend. However, the bulls have come to the rescue again. The precious metal is climbing back above its neckline with crude and the S&P futures trading in positive territory.

Gold continues to take its lead from the Dollar. A depreciating greenback makes the precious metal a desirable safe haven, especially as Russia, China, and Brazil plan to diversify their reserves. China revealed it has increased its precious metal stock piles over the past couple years, and we wouldn’t be surprised if they’re ramping up this operation right now. Therefore, there are still many fundamentals in favor of gold’s medium-term uptrend despite the near-term downtrend tendencies.

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