Gold is making a bit of a comeback Tuesday, jumping up to daily highs as the U.S. dollar weakened and stock markets sold off.
However, one analyst says the downtrend in gold remains as long as this one key level isn’t breached.
“The main trend is down according to the daily swing chart. However, the market has been range bound since late September,” noted James Hyerczyk, publisher of The Pattern, Price & Time Report, in a post Tuesday.
“The main trend will change to ‘up’ on a trade through $1289.50.”
After seeing pressure earlier in the week, gold managed to test the top of its current range, jumping to a high of $1,282.40 an ounce on Tuesday – just a few dollars shy of Hyerczyk’s key level. December Comex gold was last seen at $1,279.70 an ounce, relatively flat on the day.
Despite gold’s move higher, the Chicago-based analyst still needs some convincing.
“A sustained move over $1277.50 will signal the presence of buyers. This could trigger a breakout to the upside with the first target a 50% level at $1279.60, followed by a Fibonacci level at $1281.90 and a down trending angle at $1283.50,” he wrote.
On the downside though, a sustained move under $1,275.80 would indicate the presence of sellers and could even push prices much lower.
“A trade through $1263.80 will signal a resumption of the downtrend. This is followed closely by the October 6 main bottom at $1262.80 and the August 8 main bottom at $1257.10.”