By Robin Mesch
Gold spent the first half of June locked in development between the 1415-1365 as the market used price against the developing bottom of value, forming a pronounced mode as time was spent accepting this lower range as fair value. By mid month, the sell order flow was reignited with the directional initiation out of this high usage area (as noted on the Profile). Last month's breakdown should have cured any remaining doubt that the Bull market in Gold is over. Once the Bears cracked through the long-term high usage ledge of 1330-1335, trapped Bull-believers were finally flushed out of the market which triggered what we anticipated would be a rapid plunge to 1250 and lower. While most of the trapped buyers look gone, this decline has likely reversed enough of the bullish mindset to trigger a change of psychology that will invigorate new selling on rallies. We anticipate that the new Bears will have the strength of conviction to carry the market down to our next major downside target of 1015-930, which we expect to see over the course of the next 6-8 months. Coming into July, there is a small ledge of high usage from 1270-1290 that is apt to serve resistance and we see this area as a viable spot to short if offered early this month. The short term downside target for this sell is around 1140.
The charts included in this report are Price Usage charts which depict the usage of a given price over time. The vertical left axis represents price, while the horizontal axis represents time. Price Usage charts display where the market has 'used' price, thus accepting - or rejecting - value. The result of this market auction process are Bell Curve shaped composite Profiles, which indicate phases of development and create a top and bottom of perceived value in the market.