For gold bugs, the second half of November had been one of hope. Hope the precious metal would finally find some much needed support, or at least find some respite to the relentless and remorseless downwards trend. That flicker of hope burnt brightly until Friday, when in thin market conditions it was snuffed out in an instant as gold prices fell sharply in the space of a few minutes, closing at $1056.20 on the week having shed $14.40 per ounce on the day. Whilst the price action was dramatic, it is the net effect of this move which is likely to have lasting consequences, with gold now having moved firmly through the potential platform of support which until then had be building in the $1068 per ounce region, but which now presents a solid area or resistance to any short term recovery higher. As expected, volumes on Friday were light, and do not reflect the lack of selling pressure but are merely representative of the holiday season in the US market, with Thanksgiving and a four day holiday coupled with black Friday, all taking priority over the markets. The longer term outlook on this timeframe continues to remain very bearish with the trend monitor and the trend dots confirming this picture.
Moving to the longer term charts it is perhaps the monthly chart for gold which is the most telling and most depressing for gold bugs, with last week’s close just testing the potential level of support in the $1050 per ounce area, as denoted with the red dotted line. More significantly gold failed to breach the ceiling of resistance in the $1140 per ounce area with the volume point of control adding further sustained downwards pressure. As such, should the $1050 per ounce area be breached in the run to Christmas then the outlook is indeed gloomier still, with $910 per ounce then on the horizon in the longer term, and should this level fail to hold, then a retest of the low of 2008 at $738.80 per ounce becomes a real possibility. Unthinkable only a few short years ago when gold prices were soaring towards $2000 per ounce. The rest, as they say, is history.
By Anna Coulling
Charts by NinjaTrader and trading indicators from Quantum Trading