Gold has been denied by our 2nd tier uptrend line, failing to retest $950/oz level due to insufficient buy-side backing. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in reaction to the rapid appreciation of the Dollar. It seems gold is waiting to see how the GBP/USD and EUR/USD react to today’s pullback in U. S. equities while deciding whether to give up on the bottom-end of its 7/20-7/28 trading range.

Gold continues to be more tightly correlated with the Dollar than the S&P futures, so investors should monitor the EUR/USD and GBP/USDs’ ability to hold their respective uptrend lines. As for the immediate-term, we suspect gold could consolidate above our 1st tier uptrend line. If our 1st tier uptrend line doesn’t hold, the precious metal could tumble towards our bottom-end support.

Meanwhile, even if gold’s pullback should pick up momentum past our 1st tier uptrend line, we can form a couple more medium-term uptrend lines beneath this area. Therefore, gold’s medium-term uptrend is intact. However, gold is only building more obstacles to the upside as it declines below important levels, most notably $950/oz. Hence, bulls would like to see gold recover above our 2nd tier uptrend line and the psychological $950/oz level so the precious metal can save face and attempt to build a new base.

Present Price: $944/oz

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