Gold breaks below $1680 yesterday, closing below a major technical support level

Yesterday gold closed below the support level at $1680. This was the first time since gold broke above this price level in April 2020. The yellow rectangle on the left side of “Chart 1”, a weekly bar chart of gold illustrates the break above this level. It is marked with a large letter “R” on the gold weekly chart below.

After the break above $1674 this level of support was successfully tested several times, labeled “support 1” is marked with a green rectangle, it occurred between May and July 2020 when for nine weeks , it traded near or at that low and closed significantly above it.

What followed were multiple instances of gold trading as low as $1680 and recovering. These areas are marked as support 1, 2a, 2b, 3 and 4. Until yesterday all attempts to break through and trade below 1680 failed. This is what makes yesterday’s price below this support level so technically significant.

Traders can view the recent action as either an extremely rare opportunity or a complete blackout and failure for gold to move materially higher. The net result of recent action by the Federal Reserve has been higher US debt yields and a stronger dollar. However, the question is whether gold will break significantly to lower prices or, as it has done in the past, recover and move significantly higher. According to our technical studies, it is a glass half full and not half empty. In other words, traders looking to buy the step will face two obvious outcomes; either an extremely great success or an exceptionally dangerous failure.

Personally, I believe the glass is half full and therefore has huge profit potential. However. I must also recognize that if this strategy is incorrect, the damage will be enormous.

Because the risks and rewards are so great, I think the most prudent course of action would be to see if gold trades close above $1680 early next week. If that happens, it would be a strong indication to initiate a long December gold position. More to follow next week.

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Wishing you as always good exchanges and good health,


Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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