Still Below the Neckline

Comments: Although Gold has nullified its Head & Shoulders Top pattern, the HUI continues to struggle below its own Head & Shoulders pattern. Last Thursday saw a failed attempt to break back above the neckline. That has bearish implications in the short term. Having said that, Gold has been positively diverging from the rest of the commodities complex which has positive implications overall.

I think the next question is where is the rest of the commodity complex going? If Oil and Base Metals are going to new lows next, then I think Gold could continue to stay range bound. If they have bottomed or will now enter into a trading range, Gold has a greater chance of breaking out to the upside.

Obviously the biggest question mark is the US Dollar. In that regard, Gold has been also positively diverging from the USDX recently and that is also a positive. It also looks like the USDX is struggling to get above a zone of resistance. in the 85 to 86 area.