(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)
12/23/2009 – Gold – Within the month of December, the dramatic bearish correction in spot gold (a daily chart of which is shown) has brought price action severely off the all-time high around 1225 hit early in the month. This month-long bearishness has thus far corrected the steep, and subsequently overbought, run-up in Gold that had occurred for several months prior to that all-time high being reached. Despite this current bearish correction, gold is still very much within the bounds of overall uptrending mode. The drop that occurred this month has brought price down to a 61.8% Fibonacci retracement level of the run from the 985 low in early October to the 1225 all-time high. This retracement level also represents a strong support area in the 1070 price region. Any breakdown below this region should meet further support at the long-term uptrend support trendline, if the uptrend is to be kept intact. And any breakdown of that trendline, which would jeopardize the uptrend, should meet immediate further downside support in the 1025 price region. To the upside, if a pronounced bounce occurs at or around the aforementioned 61.8% level, confirmed by a strong breakout above the steep downtrend resistance line of the bearish correction, gold could very well be on its way to recovering the gains made prior to this month’s bearish correction.
James Chen, CMT
Chief Technical Strategist
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