Tuesday, July 27, 2010

Gold not glittering

Seeing the action today in gold, I felt compelled to do a post on gold even though I had no plans to write one. Ever since the beginning of the big move up in the latter half of 2008, gold has held steadfastly to a trendline that I have often pointed out both on the blog here and twitter. Well dear readers, today was the day this trendline broke. Have a look!

Let's zoom in a little closer. Here you can see the trendline being broken more clearly. The volume pattern has been really bearish the last couple of months. The negative slope of the MACD is another tell. All in all, things don't look good for gold here. The silver lining is the presence of MA(200) at 112 level. It will be interesting to see if this important level provides the expected support. And if there is indeed a bounce from this level, pay close attention to the accompanying volume.

This plight of gold is reflected in the gold miners index. It formed a double top late last month and then broke its own trendline earlier this month. A bounce was rejected right at the trendline. Finally, it made lower lows today accompanied by a break of MA(200).

Looking at the above charts, I wouldn't be too eager to try and call a bottom in gold here. Depending on how it deals with upcoming MA(200), I like it more as a short than a long here.

Take care and good luck!

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