The question on the minds of many Gold investors is: is the bull market over?
As I’d been pointing out for a few weeks, Gold really needed to stay above 1,550 to have a shot at a rally.
Now that this past week the bears mauled the Gold market with an overwhelming glut of sell orders, the bulls are going to have to defend 1,400, and perhaps 1,200.
For right now, Gold bounced meekly off the lows and has held at the 1,400 area.
Going forward, 1,500 will be an important resistance level to overcome because there are going to be a ton of folks who are eager to sell up there.
Many will view rallies in Gold as opportunities to reduce their losses, but judging from this week, the bears are going to have to fight to get below 1,300 (or just trigger another panic wave).
There are two different ways to look at this and which way you choose depends on your reasons for following the Gold market.
If you view Gold bullion as a long term hedge against Dollar devaluation, then you can look to buy at lower prices like this.
If you’re a trader, there have been many opportunities to short Gold and profit to the downside, or even buy some of the bounces off support levels.
It’s important to factor what your goals are into whatever you decide to do next.
In the chart above you can see that we’re still above the longer term uptrend line set back in 2011, but there’s a lot of room to go down before we test that trend line.
Just like in Gold, the bulls need to defend the lows for this year. I am expecting a run back at the highs but I’ve drawn a channel that defines the sideways market conditions I anticipate we’ll have in the next few weeks.
Keep your eye on the support and resistance levels I’ve drawn in both markets because as we’ve seen, big moves can happen quickly when important levels are crossed.
David K. Miller
Managing Editor, AbsoluteWealth.com