The violent sell-off in gold has brought the metal back to levels not seen in two and a half years, since the fall of 2010.
Gold's technical weakness has been evident and unchanged after the break of channel support on April 4th at $1500. That down channel base, extending back to early November, became strong resistance when gold moved back to the underside of the channel from April 25 to May 10th. The more than $76 fall today, $1352.75 to $1276.44 top to bottom, crossed last month's low at $1339, the 2013 low at $1322, the January 2011 low and support at $1308 and the September 28, 2010 low at $1283. The last time gold traded at this price was September 9th 2010.
Support lines that relate to prices of more than 30 months ago are necessarily of weak composition, the relevant trading having been subsumed in more recent action.
The next support indication is at $1264, which marked the top from early June 2010 to the beginning of July, when the market fell away reaching $1157 on July 28 before turning and it did not re-cross $1264 until September 14th. Next support is $1226 the top from December 3rd 2009. And finally we have $1157, the previously mentioned base on July 28th 2010, backed by the 38.2% Fibonacci at $1155.72 of the entire October 2008 to September 2011 run from $682.57 to $1921.17, (the 61.8% retracement of the same move). That is likely to be the only substantial technical support in the immediate vicinity.
The predominate factors in the gold fall are fundamental undermining the demand for the metal's role in the global financial system and economy: the fear of worldwide financial collapse has withdrawn and inflation is quiescent disabling gold's role as a hedge against each; economic growth is slowing in China, India and much of the emerging world while it remains slow or recessionary in the developed world diminishing the demand for gold in the industrial and consumer sectors.
Chief Market Strategist