Gold Weakens & What's New

By Colin Twiggs
December 2, 2008 6:00 a.m. ET (10:00 p.m. AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.

What's New

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After a brief consolidation, spot gold fell sharply through support at $800, heading for a test of $750 (the upper border of the pennant). The sharp reversal is a bearish sign and a test of $700 is now likely. Recovery above $800, while unlikely, would negate this.

Spot Gold daily chart

Source: Netdania

On the long term chart, the US Dollar Index continues to strengthen, indicating that gold is likely to remain in a down-trend. Gold reversal to $700 would mean another up-swing failed to test the upper border of the long-term broadening descending wedge formation — signaling a downward breakout and test of the June 2006 low at $550.

Spot Gold weekly chart

Crude Oil

West Texas Intermediate Crude broke through support at $48, the 2007 low. Expect a test of $40; calculated as 48 - (56 - 48).

Crude Oil 2 Hourly

Source: Netdania

OPEC production cuts have so far had little effect. In the long term, if support at $40 fails, the next major level is $20, the 2002 low.

Crude Oil Monthly



The euro continues to consolidate around $1.25, forming a symmetrical triangle. Expect a test of primary support at the 2005 low of $1.16.

Euro US Dollar

In the medium to long term, failure of support at $1.15 would offer a target of parity. Calculated as 1.15 - (1.30 - 1.15).

Euro US Dollar Monthly

Source: Netdania

Japanese Yen

The dollar fell below 94 yen, warning of another test of the October low of 91. In the longer term, the primary trend is down, with a target of the 1995 low of 80.

US Dollar Yen Monthly

Source: Netdania

Australian Dollar

The Australian dollar continues in a descending triangle against the greenback, with the RBA attempting support at $0.60. Today's interbank cash rate cut to 4.25% will add further weakness. Breakout below $0.60 is more likely — and would offer a target of $0.50. Calculated as
0.60 - (0.70 - 0.60).

Australian Dollar US Dollar

Source: Netdania

The Aussie Dollar is faring even worse against the yen, testing long-term support at 55. Breakout would offer a target of 40; calculated as 55 - (70 - 55).

Australian Dollar

Source: Netdania

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