Big-picture For Gold Price

London (Sept 30)  In the past we’ve talked about the inverse correlation between gold and the dollar and how at times it can converge so as the two trade another. But those are generally short-lived aberrations before the two once again go their separate ways. With that said, when looking out over periods longer than a few weeks the negative correlation is typically reliable, and as such if the dollar is to undergo a meaningful rebound we are likely to see weakness in gold continue. Even on gold’s own technical merits it looks poised to decline further before finding meaningful support. Last week’s close below the double-tops from April/June at 1296 suggests a move towards the December trend-line in the 1240s is underway.

Trade below this t-line will likely lead to a retest of the 2011 trend-line. The crossing of this trend-line during the summer was an event that could have long-term bullish implications, and a retest before turning higher may be in order. If either of the aforementioned lines fail to provide support, then a move to 1205 and the December 2015 trend-line becomes the risk.

Looking higher, confluence between the September high and trend-line from August 2013 (~1360) will be a big test for gold. Looking beyond there the next targeted line of resistance will be the upper parallel tied to the December trend-line, which depending on the timing could align with the 2016 high at 1375.

Bottom line: There are a lot of levels/lines in close proximity to one another above and below current levels which could present attractive ‘decision points’ for traders.

DailyFX