We’re not huge fans out old-fashioned trendlines but when a line has been tested and it has held several times, it’s important. That’s the case with the long-term uptrend in gold. The support level proved to be worth watching but it broke today and the outlook for gold is looking increasingly negative for the short-term.
The trendline is from the credit crisis low of $682.41 on Oct. 24 2010 through the November low of that year and a low in January 2010 and March of this year. Gold bounced off this trendline last week but the bounce was shallow and now the market appears to breaking definitively lower.
Today, gold is down $19.50 to $1164.05 per ounce. The next significant level of support is the 200-day moving average at 1148.07. The 200dma hasn’t been breached since January 2009. Further support rests at $1043.
We hate to be short in an uptrend but will look to a $10-20 rally as an opportunity to establish a short position.