The end of May and beginning of June were excellent for gold bulls. Everything went smoothly and according to the technical plan. At Alpari, we were signaling the possibility of a significant upswing from the 23rd of May. Apart from the price action factors, there was a bit of luck here. Help came from the fundamental side of the market – from the White House. Markets were shocked by the proposal of new tariffs targeting Mexico. The combination of Mexico, China, and Iran put the market firmly in risk off mode, so a situation where gold was poised for gains.
Technically, rises were supported by the fact that gold managed to defend the long-term up trendline (orange) and bounced from the 38.2% Fibonacci, which for the past few weeks was a crucial support. All that was happening inside of the wedge, which is a trend continuation pattern and was promoting a breakout to the upside. The decisive bullish attack happened on the last day of May and the first trading day of June brought us a continuation of the golden optimism.
Everybody was wondering if buyers will have enough power to beat the tops from February and set new long-term lows. The answer to that question came on Friday and was positive. Monday brings us an agreement with Mexico, and along with it a correction on gold. This correction could easily turn into a reversal. Everything is in bullish hands now. If the current drop is only meant to be a correction, we should see a rise sometime soon. Staying below the recent top for longer will be a definite negative sign and the bulls should avoid this situation at all costs.