Yellow Metal (Gold) is consolidating within a mini-range above its prior range. It is now debatable whether the short-term trend is still bullish – it could now be characterized as “sideways”.
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Gold’s medium and long-term trends, however, remain bullish, which given “the trend is your friend,” means the odds favor an eventual breakout higher materializing.
The breakout from the prior range (which also resembles an incomplete triangle pattern) that occurred on August 14 generated an upside target at roughly $2,555, calculated by taking the 0.725 Fibonacci ratio of the range’s height and extrapolating it higher. This target is the minimum expectation for the follow-through from a breakout based on principles of technical analysis.
A break above the $2,532 August 20 all-time high would provide confirmation of a continuation higher towards the $2,555 target.
Alternatively, a break back inside the range would negate the upside projected target. Such a move would be confirmed on a daily close below $2,465 (August 22 low). It would change the picture for Gold and suggest the commodity might be starting a short-term downtrend.
Gold Up After Report shows China Demand
Gold is probably gaining support after data from the World Gold Council (WGC) on Tuesday showed China’s net Gold imports rose by 17% in July, the first month of increases since March. A modest increase in net inflows of 8 metric tons ($403 million) led by North American funds last week, was also noted.
The precious metal may be benefiting from a slide in the US Dollar (USD), to which it is negatively correlated. The US Dollar Index (DXY) is pulling back down on Thursday and trading in the 100.90s, rolling over from a peak of 101.18 reached Wednesday.
