Wednesday, March 24, 2010
Longer term I see gold as a large bull flag.
Near term I see it as bearish combined with dollar strength and a general risk appetite, money seems to be seeking yield not safety.
From March 08-August 09 gold formed a large wedge and broke to the upside without a retest of the break. Technically I would expect at some point price would come back and test that level (around 1030 and possibly retest 1000) before continuing higher.
What is interesting about the head and shoulders pattern on gold is that a measured move projection from the head to the neckline predicts a drop to almost 1030, where gold broke out from, so it all "fits" together technically.
The dollar index, in my view, has broken out from its bull flag and is set for a next leg up, EURUSD has broken down its bear flag tonight, I see a possible v large head and shoulders on AUDJPY and a bearish gartley pattern on AUDUSD (+ 240min H&S), all of which support a move down in gold.
I think the surprise rate hike in India last week was also supportive of a drop, India is the worlds largest consumer of gold.