Gold has broken out of its corridor

by bitkogan

For nearly two months, it traded within the range of $1975-2050. Support at its lower boundary held off a price decline in the latter half of April, but it couldn’t hold up this time.

Prices have dipped below that range, now breaching the 50-day average.

The reasons are apparent. Optimism about the debt ceiling, plus upward movement in the dollar and other risk assets can only mean one thing: a corresponding downturn for gold.

So where might the drop stop?

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This morning, Lorie K. Logan gave an additional boost to the dollar, adding to the uncertainty about just how far gold could fall. The next halt could be at $1950, where the price would meet the ascending trendline from November. By early June, the 100-day average will likely reach the same point. At that poing, you could speculatively buy a bit of GLD or JNUG.

But be cautious with the volume, as a breach of the trend could quickly drive prices down to $1900 or even lower. If that happens, it would be a good opportunity to buy more substantively, as I see gold substantially above $2000 in the long term.

If gold quickly returns to its range, it will likely rebound to $2010-2020. But as always, further movements will depend on the developing situation.

Even if there’s no immediate need to hedge against a default, inflation risks remain. Having some gold still won’t hurt.

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