January 21, 2014 – Gold (daily chart) has retreated from key resistance around the 1265 area after hitting a high of 1262 early in the week. This 1265 resistance area has served as strong support and resistance since mid-2013. This level also currently coincides with a major downtrend line extending back to the August high around 1433. Gold’s rise to this strong resistance occurred after the precious metal retested June’s 1180 multi-year low on the last day of 2013 to establish a double-bottom and more than a three-year low at 1178.
Having just turned down from resistance, gold is exhibiting signs of a potential resumption of the bearish stance that has been in place since the October 2012 1800-area high. The current bearish environment is reinforced by the 50-day moving average being well below the 200-day moving average, both of which are pointing decisively to the downside.
Moving forward, a continued bearish environment should potentially prevail for gold. Any further breakdown below the 1178 low would confirm a continuation of the sustained bearish trend that has been in place since the noted October 2012 high. That breakdown could then potentially position gold to target further downside around the 1000 psychological support level. Upside resistance within the current bearish environment continues to reside around the major 1265 resistance area.
James Chen, CMT
Chief Technical Strategist
City Index Group
Forex trading involves a substantial risk of loss and is not suitable for all investors. This information is being provided only for general market commentary and does not constitute investment trading advice. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any financial instrument and should not be used as the basis for any investment decision.
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