On Thursday the bearish headlines started flashing across the news wire: gold breaks below $1,200. I cautioned in the previous report that gold would likely experience spillover weakness in the coming days after breaking down from a descending triangle chart formation. While the minimum downside target for this pattern projected to $1,250, breakdowns that are accompanied by heavy institutional bearish sentiment – like the kind gold experienced – are apt to overshoot the downside target.
I have no price target for a bottom since I don’t believe in “catching the falling dagger.” I’ll leave that to the bottom pickers. For now I recommend that we simply wait for gold to exhaust its selling pressure, which it likely will in the next few days, then wait for the inevitable reversal before evaluating the near-term technical prospects for a tradable rally. The good news (besides the latest Goldman Sachs report) is that the important 10-month price oscillator for gold should turn up on July 1, which will give us the first technical indication that a worthwhile bottom is in the making.