Gold, potential for a bottom building phase

Two weeks ago, on June 19th I last publicized my thoughts on the state of gold here  Since then the yellow metal has done just about exactly what i thought it would and reached my downside targets, which now leads me having to take a step back and evaluate what may be next in store.

On June 19th gold, as measured by the SPDR Gold Shares (GLD) was just dangling at support of the 50% retracement of the rally from the 2008 intermediate term lows up to the 2011 peak.  I offered that while from a medium term time-frame gold  was thus getting closer to a bottom-building phase than anytime since the downward acceleration began in the spring, I suspected that a break below the then immediate-term support could usher in the following levels: $127.50 and possibly the $114/$115 area.  After snapping support soon thereafter, the SPDR Gold Shares (GLD) reached my $114 – $115 target on Friday June 28th, before starting a sharp intraday bullish reversal rally.

The $115 area from a long-term point of view correspond to the important 61.8% Fibonacci retracement level of the 2008 – 2011 rally, and thus offers a good reference area of support, at least for now.  After having reached this area, from a longer-term point of view in my opinion gold may now finally be in a position to start a bottom building process.  As it pertains to trading the SPDR Gold Shares (GLD) now, I suspect the yellow metal will enter a choppy sideways period with wide swings as it tries to establish a better bottoming range.

gld multi year

Closer up on the daily chart, SPDR Gold Shares (GLD) right after hitting my $114 – $115 target range, bounced strongly last Friday  June 2th with a bullish outside day and continued on Monday July 1st with follow-through buying.  As discussed above, I suspect this bounce could be volatile, but a re-test of the $130 – $131 area, which was previous support, could well be in the cards.  This area could, by the time/if its reached also coincide with the 50 day simple moving average (yellow line), and thus offer a confluence resistance area of sorts.  Ultimately I suspect any further near-term bounce to be part of a longer bottom building phase, which will not be for the faint of hart from a trading point of view.

gld daily





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