After making a new all-time high last week, spot gold has had three consecutive bearish days. The precious metal closed -0.6% lower in New York at $1,419.80. The fundamentals that normally drive gold higher have somewhat exhausted themselves. Portugal will most likely require a bailout and market sentiment still is confident that if Spain is in need of help, they will be supported as well. Japan’s nuclear crisis will require constant coverage since there is not a definitive point of stability due to fears of radiation links. The tensions in the Middle East and North Africa region are constantly changing. Libyan rebels, with the support of NATO air strikes are advancing in their fight against Libyan President Muammar Qaddafi. U.S. statistics excluding housing (despite today’s impressive Pending Home Sales) are improving or at the very least heading in the right direction.

The previous all-time high on March 7th had gold retrace $60 before resuming its bullish overall trend. Gold has not been able to advance since the record high of $1,447.60 on March 24th and if bearishness continues, critical support could be breached. Today’s daily gold chart shows that price action earlier today bounced off of both the internal support line(show in yellow) and the 50% retracement of the March low to high move. The short term bullish bias could be negated, if bearishness persists below the 61.8% retracement and our bullish trend line from January 28th (show in blue). Further downside could target the $1,394.70 area. If we see a close above $1,430, the bearish correction could be over

Edward J. Moya
Market Strategist, FX Solutions

FX Solutions

IMPORTANT NOTICE: These comments are for information purposes only. Past results are not necessarily indicative of future results. Trading Futures, Options on Futures, and Foreign Exchange involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The information contained on this email does not constitute a solicitation to buy or sell by FX Solutions,LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law.

(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend lines in red; horizontal support/resistance lines in yellow; 200-period simple moving average in light blue.)