Last week, we talked about our short term target for gold at 1360. Then we would look for gold to make some kind of correction. Gold reached as high as 1348 and closed the week at 1341. However on last Saturday, President Trump announced that the U.S and Mexico have reached a deal on immigration and borders. Therefore, planned tariffs on Mexico has been indefinitely suspended. This announcement right away put pressure on gold. Its price dropped $20 from the top when market re-opened on Monday. This drop surely is due to profit-taking from traders and investors. So now we think gold has started its correction phase that we were expecting even though it was still 10 bucks short from our major target at 1360.
As of this analysis is written, gold is trading at 1322 that is $26 drop from the top. We think gold has reached its first support area at 1318-1321. Yet we see a possibility that gold can drop even more to 1307-1310 or 1300 area. Please take a look at the above daily chart. Yesterday gold formed a bearish engulfing candle that engulfed two previous candles. This bearish engulfing candle can signal a short-term reversal for gold. More importantly, this bearish engulfing candle appeared at the resistance zone. So what we want to do is to watch for today’s close. If today’s close is a down day, it will be a confirmation of the bearish engulfing pattern. It could mean gold will go down to lower supports as drawn on the charts. Those support are 1307-1310 and/or 1300 area.
So for now we will keep watching for today’s close. A red candle means gold would drop more. A green candle can mean that gold might find good support at 1318-1321 and bounce up. We will look for a setup to go long or short depends how it turns out.