Gold is taking a bit of a breather after earlier climbing to a new recovery rally high at $1220.70 in the December futures (GC), a full $53.60 and 4.6% off its August 16, 2 1/2-year low at $1167.10.In a very bullish set-up, gold (GC) should digest recent gains above the $1207 area, where the 5 DMA has just crossed above the 20 DMA. However, if $1207 is violated and sustained, then we should expect gold to press into a deeper correction of its $53.60 rally, towards the $1195-$1190 support zone, which MUST contain the weakness to avert a complete retrace of the August advance.
If either the shallow ($1207) or deeper ($1195/90) corrections unfold, the subsequent upleg will point to $1250.00.
Let’s notice on the second chart attached below, of the USD (DXY) that its weakness off of a multi-month high at 96.98 on August 15 coincides precisely with the inverse (upside) price action in December gold. This is a classic relationship. To the extent that DXY weakness has inflicted damage to the dominant 2018 uptrend and points lower in the hours and days directly ahead, a gold rest-digestion period should be shallow and well-supported.
