Gold hit $1070 and is above $1050, but…

There are some reasons to believe the dollar has bottomed at just above 75 and there are plenty of signs the current peak in gold is fragile. One of the main signs is declining volume.

Gold finished the week at just above $1050. That’s some reassurance that the rally isn’t over. In the C wave scenario, a B wave top could go above $1100, so there might be some further move up. But things are getting precarious up here.

Be cautious if you remain long. It could be a good idea to bring trailing stops up pretty close, like near $1030 (spot price). At this point it’s conceivable we could get a drop below $1040 and then make a stab at $1100, but a serious drop below $1040 could be a sign of trouble.

And it remains true we might get a test of $960. This recent move up could be a lot of speculative exuberance from the upward break of the triangle at $960. The dollar has remained weak but not that weak. 75 is still a distance from 71, the all-time low.

But so far, we seem to have a convincing break above $1050. It’s just that there is not much technical evidence that this move up has a lot of substance. Let’s keep an eye on the dollar, as that has reached the limit of a Delta long-term turning point low. The next long-term turning point is a high.

This entry was posted on 17/10/2009 at 04:06 pm and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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