Gold’s behavior near the $1,190 – $1,200 resistance level this week will be telling and thus important to watch. Broken support should act as resistance on the next advance. In plain English, what we are saying is that since buyers failed to show up at $1,200 last November in the wake of the post-Trump sell-off, all else being equal we would expect them to be absent this week when the price tests that level again.
If the gold price backs off in this resistance region as we expect it to, it will indicate a market that is set to spend the next few months range-bound between $1,200 and $1,115, with the possibility of grinding lower toward the 2015 lows near $1,045.
However, should the market disregard the $1,200 resistance and continue higher over the next 1-2 weeks, it will indicate that an entirely new class of buyers has emerged. Effectively, it would mean a different set of buyers are filling in for those absent last November.
Watching gold as it approaches $1,200 will thus be an important indicator for the remainder of 2017. A strong advance through this level will be telling us that the long-term 2011-2016 (magenta color) downtrend will not represent as significant of a challenge on the next attempt as it did during the multiple attempts of 2016: a new set of buyers will have entered the market to support prices.