Gold drops sharply towards major support

Gold (daily chart shown below) has been dropping sharply within the past week, potentially on its way back down towards major support around the 1180 level.

This 1180 level has held strongly as support since it was first tested in June of 2013. Since that time, the level has been re-tested and respected two more times – at the very end of 2013 and recently in early October – forming a potential triple bottom pattern.

After rising from the third support test in early October, gold hit a high last week of 1255, just short of its 1265 target, before dropping sharply.

Wednesday’s FOMC statement significantly exacerbated the precious metal’s decline, placing it on a potential path towards 1180 once again.

Gold remains entrenched within a long-term downtrend extending back at least two years to October of 2012. In the event of a breakdown below key 1180 support, which would further extend the long-term bearish trend, the 1100 area is the next major support target to the downside.

In the event of any rebound at or above the 1180 level, the 1255-1265 area should continue to serve as major resistance to the upside.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.