Taking A Look At Gold

One month ago, we discussed the increased risk of holding gold as key price resistance was being tested with a long-term negative divergence on the MACD present.  That was a sign of slowing momentum and that, combined with price resistance, simply tells us to grab profits and respect the resistance - at least until gold makes the breakout.  Well, the breakout was never made.  In fact, take a look at the following two charts.

The first chart is how gold looked one month ago:

Now let's fast forward to show that resistance did, in fact, hold back the bulls and the slowing momentum and overbought conditions resulted in an approximate 7% drop that has now sent gold back much closer to key price and trendline support levels:



After flirting with $1800 per ounce, gold has fallen back to Friday's $1679 level.  Note on the chart above that initial support resides at $1675.  If that level doesn't hold - and it may not - more significant price support and a key trendline both coincide in the $1615-$1640 per ounce range.  I'd expect that basic risk management would certainly begin to favor the bulls once again at those prices.