Gold Adds onto Yesterday’s Swift Selloff

By Fast Brokers – Gold is at it again Wednesday, following through on gold’s technical selloff on Tuesday.  The precious metal has dropped below the safety of the bottom end of the 7/15-7/20 trading range.  Gold continues to drop faster than the Dollar appreciates while crude finally tags along to the downside.  The size of gold’s pullback is incredible, and we still haven’t found the driving force.  Many analysts are attributing gold’s decline to the Dollar’s appreciation.  However, we believe it’s the other way around.  Losses in gold are exacerbating the appreciation of the greenback.  Furthermore, we speculate the size of gold’s selloff without probable cause may imply a shift in governmental reserves.  China may be opting to support record U.S. debt auctions instead of buying up precious metals after a productive meeting in D.C.  Again, this is purely speculation, yet we do believe there is a relevant story taking shape behind the scenes.

While gold may attempt to stabilize from present levels again today, the precious metal is at another important juncture.  June 15th lows could play an important role in defending gold from an even larger retracement towards our 1st tier uptrend line.  We view our 1st tier uptrend line as the last line of defense for the medium-term uptrend.  A break below our 1st tier uptrend line would ultimately lead to a retest of the highly psychological $900/oz level.  However, the trend line is far away, providing gold the opportunity to form a new base around our new 2nd and 3rd tier uptrend lines.  The fact gold is made this pullback with U.S. equities is both odd and disconcerting.  For if the S&P futures should decide to join the party, gold may be forced even lower due to their positive correlation.  While immediate-term momentum is to the downside, it remains to be seen whether this is just a setback for the medium-term uptrend or the beginning of a larger leg down.

Present Price: $925.75/oz

Resistances: $927.54/oz, $928.87/oz, $931.22/oz, $932.76/oz, $933.78/oz

Supports: $925.71/oz, $923.28/oz, $922.30/oz, $920.36/oz, $918.25/oz

Psychological: $900/oz, $950/oz

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