Gold did not have a good week falling below chart support at the 50 week moving average for only the second time since the bottom made way back in late 2008/early 2009. As you can see, since then it had only violated this important chart level once and that was the very last week of trading in 2011. You might recall that funds were then dumping longs, booking profits before year end and moving out of commodities over fears of European sovereign debt meltdowns.
The start of the new year brought with it expectations of increased liquidity coming from Western Central Banks to deal with the fallout from that sovereign debt crisis and the deflationary impact it would necessarily have on global financial markets. As the new year unfolded, funds increased exposure to the commodity sector in general and to gold in particular, that is until Uncle Ben and his merry band of dollar creators decided to try talking down the commodity sector and herding these pesky funds into the equity markets instead.
Seeing the importance of this chart level now violated, it is imperative that bulls push the price back up through it before the end of next week's trade. Two consecutive weekly closes below this level would not augur well moving forward.
As long as gold holds above the red lines shown on the chart and labelled as chart support, it will be okay as it still remains in a very broad range defined by a top at $1800 and a bottom down near $1535 - $1530.
Central Bank buying has been quite strong down at that latter level and I would expect that to continue should price indeed move down towards that level.
As far as any upside momentum goes for the metal, it is going to have to firmly clear and hold the $1680 level before it can generate the least bit of excitement.
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