Gold Falling Apart Into Support

by on November 18, 2013 5:41 pm BST

Gold is falling after last week’s rebound. Hedge funds are increasing their bearish outlook as net-long positions fell 37 percent in the week ending on November 12, according to the Commodity Futures Trading Condition (CFTC).

Price action is falling into daily support at $1,265 per ounce. If this level can hold, gold might be able to rebound. However, prior to this current leg down, gold was trading within a tight range between $1,280 and $1,290 per ounce.

The RSI is aggressively sloping downward, and the -DMI is perking upwards. A bounce from support could bring gold back into the previous trading range, but it is not likely.

1D Chart of GC

1D Chart of GC

A break of $1,265 will lead into the next level of support into $1,250. Again, gold bulls must acknowledge gold’s fundamental reasons for declining. Denial leads to losses. Equities continue to blast forward and inflation, gold’s main reason for holding, is much lower than expectations. As long as the driving forces behind gold’s upward move remain in neutral, the downtrend will continue.

Michael Shaoul, chair and CEO of Marketfield Asset Management LLC, said “the danger for gold is it’s in the middle of a significant bear market move, rather than having completed one.” He also acknowledged that Janet Yellen’s view on quantitative easing were already known and the rally was short lived. Goes to show, gold continues to be traded and not invested.