Given the elevated levels of fear running through broad financial markets right now, the appetite to buy gold will likely remain solid. Yesterday’s decisive negative candle saw the market closing -$25 lower as a bout of profit-taking took hold. However, we see this as a near term move that has just tempered some of the exuberance, rather than changing the outlook. We see it as similar to the January bull run which culminated in a -$75 move back from the high, before the bulls took control again. Blowing the froth off the top can be a good thing for a bull run. Gold unwound -$60 to yesterday’s low, but already the signs are that the bulls are returning again. The move has unwound to 23.6% Fibonacci retracement (of $1445/$1688) at $1631 around which support is forming. Although momentum has lost some of its zing, there is still a sense that near term moves lower will find willing buyers again. The market may have closed a gap at $1649 (theoretically negative) we are not anticipating a deep correction. This may mark the early stages of a more considered phase of consolidation for gold, but weakness remains a chance to buy. The hourly chart shows support at $1628 above the $1611 key breakout. Above $1660 would re-open the upside.
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