Gold Breaks Major Weekly Support

Aug 12, 2008: 6:00 PM CST

On Monday, gold prices convincingly violated a key potential support zone, and now it appears that the path of least resistance is to the downside.  Let’s look at the weekly chart:

Price violated the rising 50 day moving average, which was an initial downside target that has now been achieved.

Price has formed a lower high and is now in the process of forming a lower low, which is just a whisper away from an official re-classification of the weekly trend from up to down, which would be a significant shift.  Gold prices are nearing the 20% peak to decline threshold to classify a nominal Bear Market (crude oil prices have already done so), and should this happen, many market commentators (TV news) will likely pick up on it quickly, if they have not done so already.

With the violation of the rising 50 period moving average, a potential (possible) target eventually becomes the rising 200 week moving average, which will continue rising to meet price should we continue lower on the chart.  A key test of this level could be coming up, but it may not happen this month or next month – unless buyers or geopolitical issues can drive prices higher, we do expect an eventual test to occur, which would be most interesting.

Gold (and oil) is suffering greatly with the renewed strength of the US Dollar Index – should this trend continue (recall that the US Dollar Index is officially classified as being in an uptrend on the daily chart, but not the weekly chart yet), then we could expect lower prices ahead in gold and oil – both of which would likely boost the US (and even global) equity markets.

Let’s keep our eyes fixed on these developments!

4 Comments

4 Responses to “Gold Breaks Major Weekly Support”

  1. headlinecharts Says:

    Hi, Great blog. I’ve reading for several months now… check out gold’s 65-week average, its been excellent support going back to 4-5 years or so. Gold just touched this average again.

  2. Mickey Hunt Says:

    This is a sucker market. Short term results (3-6 months) may prove to be the Venus Fly Trap for many. Inflation is
    inevitable and gold may break 1500 within 3 years.

  3. Corey Rosenbloom Says:

    Headline,

    Will do! I easily get stuck only viewing the 20 and 50 period averages and miss out on other important combination.

    Thanks for the heads up!

  4. Corey Rosenbloom Says:

    Mickey,

    I agree totally and am having difficulty believing gold can be so low in the current environment – just today, inflation reports came in at double what was expected. I’m still quite bullish gold, but tend to overfocus on the short-term patterns and analysis. It will feel more natural to see gold higher, but for now, it could signal a great buying (or hedging) opportunity.

    Thank you for reading!