During the N. American trading session today, gold moved down towards the bottom of the range I have noted on the chart. That is near $1280. It managed to bounce higher as buyers entered down at that level and kept the range trade alive. However, here in the Asian session, the sellers are back out in force and have taken it down through the bottom of the range below $1280. It is imperative that the bulls take this market back above that level or the bears are going to target another $20 drop in the metal into the next region of support on the chart near $1260.
I am also viewing the ADX line ( dark purple) which is slowly flattening out and looks like it is trying to rise again. If it does, and this is not a done deal yet, it will signify the RESUMPTION of the EXISTING DOWNTREND. In other words, the -DMI has not crossed below the +DMI through this entire bounce higher indicating that the bears still regained control of the market, even though it had made a significant recovery off the spike low at $1180. The downtrend, as a result, had been interrupted but is very close to being resumed again.
If that occurs, you will see intensifying sell pressure on the metal as the specs pile on the short side. Meanwhile, the bullion banks will be more than likely moving onto the net long side of this market.
Just like it has been doing of late, the HUI, the mining shares, are simply sucking the life out of the metal's prospects. No one wants to be an aggressive buyer of gold when they can see the gold mining shares going nowhere but further down. To witness a 6% plunge in that index in one day is unnerving to all but the most deep-pocketed, long standing gold bulls. The gap area that had initially been serving as overhead resistance has now been completely closed from the top side moving down meaning it has failed to serve as chart support. That would indicate that the next gap on the chart, ( the red rectangle zone ) will more than likely be tested soon.
