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Gold In The Danger Zone

|Includes:SPDR Gold Trust ETF (GLD)

The Daily Reckoning has an informative chart today, although I do not agree with the conclusion they emphasize.

(click to enlarge)Click to enlarge

It is true that 1,550 is a strong support level for gold. But it is not the last defense. There are support levels at 1,480 and in the 1,300s.

Some time ago I looked at long-term uptrend support lines for gold.

Taking a longer view, let's look at a 20-year perspective with a graph presented last year:

(click to enlarge)Click to enlarge

You must extrapolate almost two years to the right to get to today. If you eyeball that extrapolation the five-year trend line support is in the vicinity of 1,100-1,120 and the ten-year trend line support is around 1,020-1,140.

Now those levels are 30% to 35% below the current price, but that is where you have to go to say the long-term uptrend for gold is over.

However, if gold does go back to test long-term trend lines, and you hold all the way to that test, you certainly will not feel like you may still be in a long-term bull market.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: GLD