The month of June has not been good for gold, with a top to bottom drop of 4%, and against June’s $1,878 peak, further declines has led to post a sharp 7.7% loss. As Benjamin Wong, Strategist at DBS Bank notes, there remain risks of further liquidation of longs if the trend support line that rises from $1,160 (the August 2018 lows) breaks.

Bears still hold the ace cards

“The bearish path is clear as the weekly Ichimoku chart’s cloud path has turned determinedly bearish with resistance sturdy at $1,880 and $1,915. The measure of intermediate resistance via the Tenkan resistance is also lowered to $1,809.”

“The danger is now a break of the trend support line that rises from $1,160, the August 2018 lows that would generate further capitulation risks, and opens the lower price band at $1,626 as a possibility (this itself is near $1,618 a Fibonacci retracement) – this requires a break of 200-week moving average at $1,650. The issue is the form and substance – if we get an evolving triangle, the drop would be a ‘controlled decline’ for $1,691-$1,677.”  

“There remain risks of further liquidation of longs if the trend support line that rises from 1160 (the August 2018 lows) break.”