Gold Hits 50% Fib Level

Gold has pulled back steadily over the last two weeks and prices now sit on the 50% Fibonacci retracement level. With the commodity locked in a powerful medium-term uptrend, see below for what we Faraday are looking for in order to move long…

Powerful up-leg 

Given gold’s bullish medium-term backdrop, we continue to watch for signs that another leg higher is on the cards. However, with the USD continuing to strengthen following Yellen’s increasingly Hawkish tones, a strong change in momentum is needed to halt this retracement. Moreover, with prices now back below the interior structural formed at the April and July highs, traders must wait for clear confirmation that this retracement has ended before going long. 
From our perspective, only a decisive breakout from the September retracement channel would offer a strong enough signal to move long. For those that question this call, cast your eyes to the two bar-reversal pattern witnessed on September 25th / 26th.  Despite the shares breaking higher from range compression, range compression formed at resistance turned support no less, a sharp selloff over the following sessions has destroyed the notion that this mid-trend retracement phase is over. 

Will gold bounce of the 50% Fib

With prices now sitting on the 50% Fibonacci retracement level ($1,281), there is once again every chance that gold may indeed rally higher from here. In fact, at the time of writing, zooming into the hourly candle chart reveals that after breaking below $1,281, prices then quickly rebounded above this level. Were prices to close here, then this would see a false break pattern emerge and offer further evidence that a move higher could be on the cards.
However, as per above, until a decisive break of September’s established retracement channel is apparent, traders should beware calling the bottom of this pullback. In the meantime, we recommend trading the range of the retracement channel and focusing on lower timeframe trade setups to do so.