The rally in the Dollar, along with higher interest rates ( the latter is the big deal) resulted in a barrage of selling in gold as bulls rushed for the exits. The result was a clean break of the first level of chart support noted on the chart. The selling did not abate until gold reached the secondary support level noted.
This level had better hold or gold is going to fall back closer to $1300.
The breakdown in the ADX indicates the uptrend has been halted. I am closely watching those Directional Movement lines to see if we get a downside crossunder of the +DMI below the -DMI. So far the bulls remain in control of the market but if that support level gives way, I would expect to see it reflected in this indicator. That could very well put the bears back in control on the daily chart.
Keep in mind, based on the long term monthly chart I posted up the other day, the bears have retained control over this market but their hold was slipping. If the daily chart breaks down further, they are going to be emboldened further and a lot of those who were forced out during this recent rash of short covering, are going to come back in on the short side once again.
The jury remains out therefore. Let's see what we get. We are going to need some positive economic data to confirm the Fed's rather rosy view of the economic outlook. They are content to place a fair amount of blame for the recent poor data on the record breaking cold temps. That may be true but the warmer months are arriving and we will know very quickly whether or not that is indeed the case.
One last thing - the Euro failed to best 1.40. In my view, that will be required for gold to best $1400.
