Gold just dropped below a level that has held as support all year.
Both times the 1280 area was our target.
However, this time around 1280 is likely going to serve as new resistance.
I wrote about the likelihood of a break lower this past Sunday when gold was still trading at 1290.
Here’s what I wrote:
We’ll have to keep an eye on how things develop here, but right now all eyes are on 1280 and whether or not buyers can step in once more this week.
Given the lower highs since February, a break lower seems likely.
But I also included a few lines about a trend line that extends from the 2018 low.
It’s going to take a daily close below the 1280 handle to open up downside targets including 1260 and perhaps 1240.
Keep in mind, though, that there is a trend line that extends from the 2018 low that could become a factor here.
That trend line intersects perfectly with the 1260 horizontal support level.
With gold now below 1280, though, I wouldn’t be surprised to see this eight-month uptrend begin to unravel.
It probably won’t unravel without a bounce from 1260 support, though.
In fact, if gold moves lower this week without first retesting 1280 as new resistance, I wouldn’t be surprised to see the market bounce at 1260 and tag the 1280 handle.
And if gold closes below the confluence of support at 1260, our focus will turn toward the next key support at 1240 followed by 1215.
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