Gold's failure to hold the $1720 level has led to increased selling pressure taking the metal down to strategic psychological support at the round number of $1700. The market is bouncing off of that level in Asian trade this evening as dip buyers/bargain hunters move in to take advantage of the nearly $100 fall in price from its recent peak made a few weeks ago.
If the bulls can take the price back up through the blue line marked "FAILED SUPPORT", gold should stabilize and range trade. If $1700 gives way, then price is headed for a test of the line marked "SECONDARY SUPPORT".
Notice how the previous steps of the stair step pattern higher are serving as support on the downside. As each of those support levels fail, the next step becomes the new support level.
Right now there is still no sign of a bottom but the market has come down quite a bit so it would not be unexpected to see it stabilize here.
The fundamental factors that led to the August-September rise are still in place, namely the easy money policies of the Fed and the ECB and BOJ, but that is old news and the market is looking for another spark to take it higher. What will need to occur is sufficient VALUE BASED BUYING TO drive a floor under the market and soak up the speculative selling from liquidating hedge funds and other specs who are bailing out.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET