Gold News Update - 28 September

PRECIOUS METALS RANGES- Trade date: September 27th

COMMENTS:
Greenback strength on Thursday drove XAU/USD down to the lower boundary of the broader sideways trading range between the Aug 24th low at USD 1183.20 and the Aug 28th high at USD 1214.85, highlighted in recent commentaries. It’s pretty much a ‘make or break’ moment for XAU/USD at this level. The market either holds and rebounds, or it doesn’t. If the latter, then a continued decline to the August 16th low at USD 1160.25 may unfold reasonably quickly. Having said that, respecting the support level at USD 1183.50 seems prudent but a tight protective stop loss is imperative. If XAU/USD does manage to rebound on bargain hunting, then it needs a move and close above the 55 Day moving average at USD 1205.20 and more importantly, a move and close beyond the downtrend / resistance line (USD 1217.40) - which has remained undefeated since gold began its retreat in mid-April -, before thoughts of consistently higher levels can be entertained.

COMMENTS:
The constructive price action of earlier in the week was erased with XAU/AUD’s failure to close beyond the highlighted 1658.00 level, despite three attempts (and ultimate failures) there this week (Mon, Tues, Wed). The major level of support at the AUD 1635.85 / 1636.85 region (August 28th low and 61.8% Fib of 1605.10 > 1688.20) now takes on extra significance in relation to the favoured view that that XAU/AUD will make further attempts at trendline resistance (1685.05) and the technically significant 200 Day moving average (1691.05). Whilst dip buying into current weakness is the preferred trading stance, it is imperative that a tight protective stop loss is in place just beneath the August 28th low, given that there is little by way of technical support until the August 16th low (AUD 1605.10) if the support is broken.

COMMENTS:
Tuesday’s surge beyond the 21 Day moving average (to a high of 14.5675) caused the 5 & 21 Day moving averages to crossover and briefly delivered encouragement that the formidable resistances at USD 14.7475 (trendline), and near USD 14.8150 / 15.00 (55 Day moving average & August 28th high) might be challenged in due course, thereby mitigating any further downside risk back to the Sep 11th low at USD 13.9375. Wednesday and Thursday’s price action however, erased Tuesday’s gains and it now remains to be seen whether bullish speculative interests can regroup and attempt to knock out the trendline resistance (USD 14.67), and bring to an end the downtrend that commenced in mid-June.  USD 13.6475 remains technically significant, having not been broken since December 2015. To the downside, a significant break and close beneath USD 13.6475, opens the way to 9 year lows.

COMMENTS:
Although it’s very early days yet, the fact that the technical support line at AUD 19.54 (dating back to April 2016) has proved so resilient this month and that the sensitive 5 & 21 Day moving averages have all but crossed, the possibility of an advance towards some mouthwatering (from a risk/reward ratio perspective) topside technical targets has increased modestly. Specifically, from its current level at AUD 19.81 down to the support at AUD 19.54 (= $0.27 risk), targets present at AUD 20.30 (= $0.49 reward), 20.35 (=$0.54 reward), $20.88 (= $1.07 reward), 21.30 (=$1.49 reward). A ‘long-legged’ Doji candlestick was posted yesterday (a long upper and lower shadow with virtually the same opening and closing price, signaling investor indecision at present levels) indicating that continuing to take a “wait and see” approach perhaps remains the most prudent course. If however, XAG/AUD can gather some momentum and take out and close above Tuesday’s high above AUD 20.0575, then the aforementioned targets would come well and truly into play. A break beneath AUD 19.54 opens the way to the April 1st 2016 low at AUD 19.32

Kind regards,
Andre