Dollar is gaining strength, which is pushing most of the commodity prices down i.e. crude oil, sugar, cotton, corn and silver, the list goes on but the commodity that catches the investors' attention the most is "GOLD". The yellow metal, although slow, is on a north journey since 2001, starting from the below $300/t.oz the yellow metal reached $1032/ t.oz just before the 2008 financial crisis, prices were under pressure for next 8 months at one point prices were $682/t.oz and then the stimulus and low interest rate reasoned for another gold bull run, which eventually tested $1575/t.oz.
From its 2008 bottom if you draw a trend line it has added $893/t.oz, the rise is very steep but that is not the case on the other side, these two line forms a rising wedge. For last two months prices are falling down but as you can see from the chart we have a very strong support around $1400/t.oz mark. Market had tested the support on many occasions but price action managed to hold above the support line. This time around outcome of most of the US fundamentals compare to other G7 countries clearly favors dollar, which will eventually be reflected in weaker gold prices.Till $1400/t.oz it will only be a blip a monthly close below this support area mean more profit taking to follow. One may inquire till how far? To answer this question if we include, Fibonacci numbers in our discussion, 38.2% first pullback would be around $1234/t.oz, 50% would be around $1129/t.oz and 61.8 % would be around $ 1024.
Bit about rising wedge, technically speaking this formation breaks most of the time in the opposite direction and therefore this formation termed as a reversal pattern but as said only and only when it manages to close below the support line. Let me make the case a bit confusing by sharing another rule or technical analysis, which suggests a support or resistance never breaks until it breaks.
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