Risk of a larger decline beneath $1600.
Gold remains bearish after its dramatic 20% price fall, which helped confirm the extreme overbought conditions (marked by DeMark™ indicators). This also timed a key cycle peak, ahead of that all-important $2000 glass-ceiling.
Most concerning is that speculative (net long) flows have recently breached a key downside level which may threaten over 2 years of sizeable long gold positions.
In price terms, Gold’s latest 20% bearish slide is still worth less than the largest average drawdown measured since the start of the yellow metal’s long-term bull market in 1999.
There is heightened risk of a much larger decline if we confirm a weekly close beneath $1600 and $1547 (200-day MA), which has not been breached in 3 years!
A number of “bargain hunting” trend-followers will be watching this benchmark “line in the sand” for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000. Remember, this would still offer a unique buying opportunity in the near future.
Please see the attached chart below.
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