The Significance Of $920 For Gold
By Colin Twiggs
July 7, 2009 1:30 a.m. ET (3:30 p.m. AET)
Spot gold is testing the lower border of the consolidation between $920 and $940. Narrow consolidation is a continuation pattern and a close below $920 [orange] would test primary support at $870. A close above $940 (or intra-day rise above $950) is unlikely, but would signal that the correction has ended. In the longer term, failure of primary support would test the November 2008 low of $700; while breakout above $1000 would offer a long-term target of $1300 — calculated as 1000 + ( 1000 - 700 ).
Gold miners tend to lead the actual gold price and the Gold Miners Index [GDX] is testing the lower border of its trend channel. Twiggs Money Flow (13-Week) bearish divergence warns of a downward breakout and subsequent secondary correction — which would be a negative sign for the spot metal price.
Spot silver penetrated its lower trend channel, threatening a test of primary support at $12. Reversal above $14 would indicate a false signal — and advance to test the upper channel border. In the longer term, failure of primary support at $12.00 would warn of reversal to a primary down-trend — a negative sign for gold.
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Brent Crude broke downwards from its rising trend channel, warning of a secondary correction. Reversal above $70 is unlikely, but would indicate a false signal — and test of the upper trend channel. The primary up-trend remains, with support at $50.
A weakening dollar increases demand for gold. The US Dollar Index is consolidating in a narrow range between 79.50 and 81. Downward breakout is more likely and would indicate a primary down-swing with a target of 73; calculated as 78 - [ 83 - 78 ]. Breakout above 81, however, would indicate that the primary trend is slowing — and test resistance at the March low of 83.
The most dangerous moment for a bad government is when it begins to reform.
~ Alexis de Tocqueville (1805 - 1859)