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Gold Risk To The Downside

Technicals | Oct 23 2014

Bottom Line 22/10/14

Daily Trend: Up
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 1180 / 1100 / 1000
Resistance Levels: 1325 / 1349 / 1395 / 1437

Technical Discussion

We have been advocating a larger longer term basing pattern being in play for Gold and precious metals in general, yet recent price action has clearly turned things more bearish. The U.S Dollar has been strong and this normally has an inverse effect on Gold prices.  Added to this that geopolitical tensions presently being witnessed throughout the world are having little supportive effect, which is an anomaly, then for the moment price doesn't appear to have a lot to recommend it from a bullish perspective. So neutral whilst 1180 holds yet the technical patterns we continue to forward do have a more bearish flavour if anything moving forward.

Reasons to remain cautious:
→ recent break below 1242 technically Bearish
→ major red flag below 1180
→ basing pattern looking best case scenario for the moment
→ outlook only improves above 1395

The bearish symmetrical triangle could be morphing into an even more bearish (in relation to downside targets) descending triangle. There is some evidence of recent buying post yet another successful retest of the 1180 support zone, and this could easily see a short term move back up towards the psychological 1300 price point. The 200 day moving average sits just below this area and is also continuing to have a resisting influence on price. So even though a move up towards this area may see Gold Bugs cheering, any major rejection will likely see us pursuing short positions rather than joining the cheer squad. Until price can break clear of 1395 with conviction, Gold and precious metals in general will be looked upon with a great deal of suspicion ! 

Trading Strategy

Our short trade has been stopped out for profit in between reviews. We were short at 1242 and exited at 1224 on evidence of strength returning. We remain unconvinced this strength will be able to sustain so as mentioned, shorting opportunities will still be on the table until a break past 1395 can be achieved. Until that time, the worst may still be far from over here.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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