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Gold Plummets Further in Massive Continued Correction

Gold Daily Chart

Gold (daily chart) as of Monday (9/26/2011) has continued its accelerated plummet of late last week and extended its fall from the all-time 1920 high near the beginning of the month to hit a low of 1532 before rebounding during Monday’s trading. This rapid depreciation of gold has brought price all the way down to hit and bounce off the 200-day simple moving average. For the time being, price action has still managed to stay above its long-term bullish trendlines, but any further downside momentum could threaten to breakdown these trendlines, thereby potentially changing or interrupting the long-term bullish trend. With upside resistance around the 1635 price region (currently the area of the 100-day simple moving average), a breakout above that level could signify a price recovery that should target the 1730 resistance price region once again. With continued downside support around the noted 200-day moving average (currently around the 1525 price region), a breakdown below that level could soon shoot for further support lows around 1475 and then 1445.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education