Gold yesterday broke the 1,325 support level and travelled to 1,307 and made a new low relative to the late July low. The pattern is still considered sideways and as long as prices do not collapse towards 1,260, then this move will be still considered as corrective and the alternative scenario that we are in wave 4 will gain more points. Our view remains bearish as long as prices trade below 1,340, but if the down trend does not resume soon with signs of weakness, then we will have to take precautionary measures for a possible short- term upward reversal.
Gold is testing the lower boundaries of the upward sloping trend channel as expected by our previous analysis. For the bears, yesterday's new low should be followed by more weakness and the test of 1,260. Otherwise bulls may come back stronger as support of the longer term channel still holds. Short term support at 1,301 if broken will give 1,287. Short-term resistance is found at 1,336 and 1,343. We remain short with 1,343 lowered stop and target 1,260 at least. We could add to short positions if support fails. Breaking resistance could also make us reverse to long positions as potential for a 30-40 dollar move is very possible.
Concluding, watch out for the break of the trendlines shown in the chart above. The longer it takes for prices to break support levels the longer bulls gather more power for an upward break. The longer it takes for a downward impulsive wave to be complete, the more possible that this sideways move is corrective and a new upward move will come towards 1,360.