Gold continues to be the most interesting market again this week…
After plummeting last week in the most abrupt and devastating way for Gold bulls, this week Gold bounced like a super ball.
Since Gold’s big belly flop there appeared to be a tug of war between the camp that declared the Gold bull market dead, and those who declared this to be a rare buying opportunity.
With Gold back approaching 1,500 an ounce after dipping below 1,400 last week, the argument for buying opportunity seems to be winning.
My take on this is a little bit different and it may not make either side happy.
Last week I mentioned that round numbers hold significant meaning in the markets. The area between 1,500 and 1,550 was support for several years.
That means that now it will be a potentially strong area of resistance.
After a down draft like we saw over the last couple weeks, Gold was due for a retracement to the upside, if only for short covering and bargain hunters.
The question is whether the buying can be sustained and whether the bulls can fight off the bears who will sell at the Fibonacci retracement levels.
Markets tend to retrace 50 to 62% before resuming a trend and right now the Gold bounce as the Midas Metal right in that area.
That means this rally is a short term selling opportunity and could lead to another down move.
Whether that is a buying opportunity remains to be seen, but I wouldn’t get too excited about this rally until we’ve seen a push above 1,550.
David K. Miller
Managing Editor, AbsoluteWealth.com