Given the continued rally in risk assets last week and the EURUSD breaking to a new reaction high we saw further safe haven selling in gold. With last week's reversal, gold failed at our highlighted key breakout level at $1692/1710. Objectively seen, the yellow metal remains in our described neutral position but given the underlying weak position in XAUEUR, as well as our belief that after a pullback in risk assets we should actually see more upside in risk into late Q1/early Q2 we have to take into account a serious re-test of the December key support at $1630. Again, in our 2013 strategy report we said that given the "re-pricing of growth" and the "selling safe assets" environment we have to take into account a temporary negative surprise in gold into potentially later March, where we would expect a more important top in risk assets. Maybe we do not see the real and dramatic impact in USD denominated gold but in EUR terms we definitely see this impact, since from its October top XAUEUR has already lost 11% of its value, which reflect the deteriorating risk premiums in Europe. Given the current price structure it is still likely to see more losses in XAUEUR, but the good news is that we would see these losses as the last sub-wave of an impulsive wave 5 bear sequence. In the bigger picture this move should complete the September 2011 correction cycle in later Q1 as the next bigger tactical buying opportunity signalled by our weekly trend work heading into oversold territory. In this context we should also not forget that despite all the frustration in the gold bull camp, gold has "just" been trading sideways since 2011, which from a pure technical standpoint represents the best case of a correction scenario!!
