Gold Drops Beneath Our 2nd Tier Downtrend Line

Gold fell sharply yesterday, crashing below our 2^nd tier downtrend line on rising volume as the Dollar appreciated strongly across the board.  However, although the losses in gold were large, the volume didn’t reach too significant of levels on our 4 hour chart.  Regardless, investors should take note and adjust their strategies accordingly.  The precious metal is presently being denied by our 2^nd tier downtrend line as price tries to recover Wednesday’s losses.  With the GBP/USD and EUR/USD both declining on large volume, we wouldn’t be surprised to see more near-term losses in gold.  On the bright side, the precious metal has our 1^st tier uptrend line and the $950/oz psychological level to fall back on, meaning the medium-term uptrend is certainly intact.

The question becomes whether the S&P futures can hold onto their 2^nd tier uptrend line.  If not, we could witness another near-term contraction in U.S. equities.  Investors should keep in mind gold and equities are exhibiting a positive correlation these days.  In all, gold’s bullish psychology has been dented, but the medium-term uptrend is far from lost even if we see more near-term losses.

Fundamentally we find resistances of $972.34/oz, $975.81/oz, $978.11/oz, $980.56/oz, and $984.51/oz.  To the downside, we see supports of $970.35/oz, $967.81/oz, $964.89/oz, $962.50/oz, and $960.47/oz. Gold is currently trading at $972.30/oz.

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