Is Something Nasty About To Happen To Gold ?

Practically every week you would hear or read "experts" praying to gold as the ultimate save and protect all "investment". According to these "experts", gold will "protect" you against a hyper inflation with the coming onslaught of the QE2 and currency war. 

No doubt gold like many other commodities has been rallying nicely recent months. But if you use an inflation adjusted US Dollars to look at its rally, gold would need to go to 1,800 in order to beat its own historic high. This is to say if you had "invested" in gold back then , you are still in a loss position with its current high.

But I do not wish to go deeper into the "fundamentals" side of gold but would like to apply technical analysis onto its charts and try to educatedly read what is its next move. This is because of the current Korean conflict which all the "experts" are telling us gold is the greatest hedging investment during times of conflicts and wars.





At the daily chart, my attention is immediately grabbed by the presence of a nicely formed bearish divergence with the lower peaks at MACD and higher highs at prices. Then there is another monstrous bearish chart formation of a Head & Shoulder Pattern. Recent prices may have completed the right shoulder. I have marked out its neckline which is also very near to its lower Bollinger Band which make the level more important. If prices break below this line, it would signal the beginning of a massive sell downs in gold.

But I think we may have to wait for a while longer before that happens as the ADX has now fallen below its 20's signal line while the D+ and D- are wiggling around with other. The positive Stochastic is contradicting the negative MACD, all these are confirming a lack of trend in this market.

But if you have been following my writing, you would know by now, a lengthy sideway market is even more wonderful for preparing for an eventual massive breakdown. This kind of move is usually extremely profitable.

At present, the AUD has already broken down. As AUD is regarded as a mineral/commodities currency, I would take it as an additional confirmation to the bearish reading of gold. I am eagerly waiting for  confirmation from another mineral currency, the CAD as it is still range bounding.

And there is another X File kind of confirmation: -  a few days ago an adviser to China Central Bank "advising" the American government that they should sell all their gold reserves in order to cut down their twin deficits.  I notice whenever some 'big guy' starts to make outrageous remarks about a certain market, it is usually a sign that particular market has come to an end.