The inability of the metal to secure a CLOSE above $1,650 in spite of yesterday's surge towards $1,660 has engendered profit taking by shorter-term oriented longs this morning. As noted the other day, the metal has had a strong rally off of a major double bottom on the chart near $1,535 since the last couple of trading days of 2011 to the present coming over $130 higher since then. Longs are wisely pulling some chips off of the table after watching the push higher in yesterday's session fail to attract enough momentum to keep it trading above that $1650 level.
The US Dollar surge to yet another 52 week high is proving to be a source of some rather stiff headwinds for the longs today as the equity markets are selling off and risk aversion trades are showing their usual signature once again.
Dip buying has been the order of the day since this rally began. We will now watch to see where this buying will resurface. There is some light support that should appear near $1625- $1620. If it does not hold there, $1,600 is the next stop.
Bulls will need to push this thing past $1650 again and KEEP IT ABOVE THAT LEVEL to have a legitimate shot at $1675 - $1680, where bullion bank selling can be expected to appear.
The trend on gold since August has been down on this shorter term chart. However, the inability of the bears to take the metal down below $1535 and start another leg lower resulted in a bout of short covering among the weaker hands in that category. Bulls have pressed hard using the strong physical offtake at the lower price levels as their ally and have managed to take the price over $1600 which is constructive. But they have a lot more work to do to turn this chart pattern decidedly bullish.
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