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May 20, 2013 – Gold (daily chart) has approached an end to its “dead cat bounce” that brought the precious metal up to an early May high of 1488, which was also right at the 61.8% Fibonacci retracement of the prior plunge. A dead cat bounce is a financial market term which is simply a sharp decline followed by only a temporary rebound that is reminiscent of a bounce that a deceased feline might make after being dropped from a substantial height. The term is significant in the case of gold because it describes the fact that there has been a bearish trend bias since October of last year, which accelerated into a severe drop in mid-April, rebounding only temporarily in late April and early May.

Price has continued its dramatic decline within the past two weeks and is currently approaching the 2+ year low of 1321, which was established in mid-April. A retest of this low could likely soon be in the making. A breakdown below that level would confirm a bearish trend continuation with further downside support objectives around 1260 and then 1155.

James Chen, CMT
Chief Technical Strategist
City Index Group


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