Gold Tests Support At $1,200/oz – Possible 50% Retrenchment To $1,000/oz

Today’s AM fix was USD 1,229.00, EUR 942.85 and GBP 799.97 per ounce. 
Yesterday’s AM fix was USD 1,285.00, EUR 979.42 and GBP 831.88 per ounce.

Gold fell $5.00 or 0.39% yesterday and closed at $1,277.30/oz. Silver finished off just 0.2%.

Gold was pummelled overnight in Asia when a very large sell trade just after the market opened led to further selling throughout the session and this weakness continued in London this morning. 


Gold in USD, Weekly, 13 Year – (Bloomberg)

Gold is now at its lowest level in 3 years. Somewhat positive U.S. economic data has again lifted stock markets and speculation that the Fed may decrease its QE over the next few months may be pressuring gold. However, these factors do not justify the scale of gold’s fall.

The yellow metal has traded down for 7 out of 8 sessions since U.S. Fed Chairman Ben Bernanke claimed that he would ‘taper’ the bank’s $85 billion in monthly debt monetisation.


Support & Resistance Chart – (GoldCore)

Gold looks set for one of its worst quarters on record after falling 7.6% in April, 6% in May and 11.5% in June.

The falls are out of all proportion to what is happening in the physical market in terms of supply and demand. They come despite strong fundamentals of continuing strong store of wealth demand and central bank demand globally.

Sentiment is as bad, if not worse, than it was during the 2008 sell off when gold bullion fell from $981 per ounce to $682 per ounce or 31%. Gold is now down 35% from its highs in August 2011 – a much longer time period.


Cross Currency Table – (Bloomberg)

Gold is oversold on a host of different benchmarks from relative strength index (RSI) to moving averages. However, the old Wall Street adage to never catch a falling knife applies and buyers would be advised to dollar, pound and euro cost average into position. 

Gold is now on sale at bargain prices and very cheap but in the short term it could get cheaper.

Gold is now set to test support at $1,200/oz. Momentum alone should see gold test support at $1,200/oz today or tomorrow. The question is whether support at $1,200/oz holds or whether we retrench even further and test support at the 2008 level of resistance which is $1,000/oz. 

This would also mark a near 50% retrenchment from the August highs at $1,915/oz.

A close below $1,200/oz this week would be bearish and could lead to further price falls.

NEWS
Gold drops again on strong U.S. data – Reuters

Gold Slumps to Lowest Since September 2010 as Silver Tumbles – Bloomberg

Gold Bear Market Hits Hardest in South Africa Mines – Bloomberg

Newcrest Is So Cheap Even Gold Bears See Deal – Bloomberg

COMMENTARY
Global Chaos Signals World Currency System Will Be Recast – King World News

Why Gold Bears Will Soon Find Out They Are Wrong – Business 2 Community

Give Silver Bullion an AAA Rating – SilverSeek

Some Hard Numbers On Western Banking System – Sovereign Man

Gold’s Sound Fundamentals and Bernanke’s Taper Bluff – Zero Hedge

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Mark O'Byrne

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