In the update last weekend we were looking for a correction back across the trend channel shown on the 1-year chart below, probably to the $910 area. In the week that has followed gold has churned beneath the resistance at its inner uptrend channel return line, remaining substantially overbought. In the meantime the dollar has fallen further to hit our downside target, in the process becoming critically oversold, thus setting the stage for a snapback rally.

With the dollar looking set to rally and silver much more severely overbought than gold and vulnerable to a sharp selloff, gold still looks vulnerable to a reaction, and it is now thought that there is some chance of it breaking down from the uptrend channel shown. However if this happens it is considered unlikely that it will drop much - instead it would probably track sideways for a while consolidating before the long-term uptrend reasserts itself.

The longer-term outlook remains bullish.