Gold Market Facing Uncertain Prospects Amid Recent Tumble

The Gold Dilemma

Gold recently experienced a surprising collapse following a record high. The sudden downturn caught many off guard, with no clear signals from short-term or daily charts hinting at the impending correction. While some attribute the shift to a stronger PMI number, the dollar’s modest movement against other currencies suggests a more complex narrative.

1. Last week, the market slipped below the previous week’s low of 2332, creating a significant bearish engulfing candle on the weekly chart. This scenario, known as a bull trap, occurs when a new high is followed by a drop below the prior candle’s low, trapping optimistic investors. Despite closing slightly above 2332, the bearish engulfing candle looms prominently, hinting at potential bearish sentiment moving forward.

2. While this occurrence doesn’t serve as an immediate sell signal, it serves as a cautionary sign that the bullish trend might be losing steam. The market could enter a sideways consolidation phase, though a dip to 2310/00 seems probable as the week commences. Observing the pattern that ensues will be crucial in determining future market movements.

3. Notably, the distance between last week’s peak and the April high makes a double-top pattern less feasible. This observation tempers the negative outlook that could have prevailed otherwise.

4. Despite hopes for a recovery, Friday saw limited gains, with apprehensive short-term bulls caught in losses. The market peaked around 2350/55, falling short of earlier expectations at 2347.

Silver Facing Similar Challenges

1. Silver encountered a breakdown below the suggested buying range of 3100/3080, triggering stops under 3050. The subsequent decline led to a low of 3010/3000, which coincided with the anticipated support level. Long positions now require stops below 2970.

2. Target levels for long positions stand at 3055/60, with a potential stretch to 3095/99.

3. A further dip below 2970 signals a sell-off, aiming for 2930/25, possibly extending to robust support at 2900/2890.

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