Downward
pressure in gold prices continued as very large funds liquidated
substantial portions of their positions in the gold ETF (GLD). Naturally, we need to look at the charts to give this story some context. (Charts were made before the close.)
The daily chart shows that price has reached the bottom of the declining trend channel, the top of which is drawn from the October high. This was something we thought likely because price failed to reach the top of the channel before it started down again. Another important event that happened today was that the 50-EMA crossed down through the 200-EMA, signalling nominally that gold is in a long-term bear market. The same type of EMA crossover occurred back in May 2012, so, obviously, the "long-term" nature of the signal is not carved in stone, but it does set the tone for the gold market.
To more accurately assess the long-term picture we need to zoom back to the weekly chart. Here we see the +170% advance from the 2008 low. After the top in 2011, prices have been moving in a horizontal range between 1540 and 1800, in what we would call a high-level consolidation. This is also known as a continuation pattern, which implies that prices will eventually break out of the consolidation and continue higher. That is a nice scenario for gold bulls, but first it appears that prices will have to retest the support at 1540 at least one more time. Obviously, that is a critical support level.
Read More
The daily chart shows that price has reached the bottom of the declining trend channel, the top of which is drawn from the October high. This was something we thought likely because price failed to reach the top of the channel before it started down again. Another important event that happened today was that the 50-EMA crossed down through the 200-EMA, signalling nominally that gold is in a long-term bear market. The same type of EMA crossover occurred back in May 2012, so, obviously, the "long-term" nature of the signal is not carved in stone, but it does set the tone for the gold market.
To more accurately assess the long-term picture we need to zoom back to the weekly chart. Here we see the +170% advance from the 2008 low. After the top in 2011, prices have been moving in a horizontal range between 1540 and 1800, in what we would call a high-level consolidation. This is also known as a continuation pattern, which implies that prices will eventually break out of the consolidation and continue higher. That is a nice scenario for gold bulls, but first it appears that prices will have to retest the support at 1540 at least one more time. Obviously, that is a critical support level.
Read More