1-28-2010 

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 Gold continues to retreat in price and is not acting as the first choice for “safe haven type” investments. To my surprise the “safe haven” role has moved to the Japanese Yen, US Dollar and US Treasuries. 

Gold has been busy this past month breaking down and testing previous support zones. In the process it has been busy punishing those buying in an anticipation of a trading bottom. Once again, it seems to me that gold is moving in $25 increments on the Daily Chart. More about this in the summary at the end of this report. 

For the first time in a long time, the intermediate chart, the Weekly Gold Chart, has turned its trend down. This puts the shorter term Daily Chart in sync with the intermediate term Weekly Chart. That is a new bearish development.

Rallies are looking like sale opportunities in the near term. 

On the Seasonal Chart provided by the Moore Research Center, Inc, the top part of the chart contains three lines. The magenta line represents the most recent 30-year pattern. The black line represents the most recent 15-year pattern. The red line represents the most recent 5-year pattern. 

The bottom part of the graph represents a smoothed price projection of what prices look like in both in Bull and Bear scenarios. Right now the Bear scenario is at work. Therefore, in studying the historical pattern, I think prices are tracking the 30-year pattern. Unless this changes, this implies that gold may not see another strong bullish “leg” in terms of time until the second half of 2010. 

Today’s break in gold confirmed that the Weekly Chart pattern turned down by breaking $1075 intraday.  

 This week I reverted back to displaying the Daily Chart of both Gold and the Dollar Index on one graph. The inverse relationship between the two is clear to see.

Unless the Dollar breaks down or unless gold de-links itself from the Dollar, if this relationship persists, gold should remain under selling pressure. 

The Dollar Index continues its pattern of making higher highs and higher lows, which is the definition of a bull trend. I marked off the lows on the chart by using a dashed blue line to make them easy for you to see them. 

Unless gold can mount and maintain a rally in the face of the bullish trend in the Dollar, gold should remain under selling pressure. 

The pattern on the Daily Gold Chart is bearish. Each rally high is lower than the previous rally high and each current low, as displayed by our proprietary Swingline Study, is lower than the previous low. The Swingline Study is displayed as the black line that runs over the daily bars. 

The key element that makes up a Down Trend is the whether or not the pattern is one of making lower highs and lower lows. That is taking place now so until 1105, the most recent high is taken out, the bearish chart pattern in gold remains intact. 

Below is a Weekly chart of Gold. Each individual bar on the chart represents one week of trading and I have plotted in “red” the 18-Week Moving Average of Closes and in “black”, the Swingline Study.

The Weekly Chart Pattern turned bearish today, as the chart pattern as measure by the Stochastic Study is one of lower highs and lower lows. Today’s low of 1073.2 took out the previous low of 1075.0 and prices are under the 18-Week Moving Average of Closes. 

It will now take a move back up and over 1163.0 to turn the Swingline Trend back up. Resistance is now at 1098.7 on this chart. 

For the time being, rallies in gold look to be a short sale opportunity unless and until April Gold takes out $1105. Resistance is at $1101.50 and the Daily Chart at this time looks oversold. Keep in mind that oversold conditions can turn into embedded situations that embolden downtrends. 

I realize that it’s fashionable to think gold has to go up in value. I fall in that camp. However, I also fall into the camp that includes traders. Right now the trend is down and oversold. On the intermediate Weekly Chart, it will take a move over $1163 to negate the downtrend and right now, both the Daily and Weekly charts are in synch as both have bearish chart patterns at work. 

I mentioned at the beginning of this report that I though gold was moving in approximate $25 moves. Today’s low was 1074.4 in April Gold. Prices are now at 1088.1. Let’s see how import $1175 becomes. If my theory is right, the $1100 zone should provide resistance and $1075 support. If prices close under $1075, $1050 is the next target. A close over $1100 projects the next resistance level to be at $1125. 

The key to keeping up with my trade recommendations is through my Twice Daily Updates and my oral updates. 

This Weekly Metal Report is designed to provide you with my current “take” on the gold market. However, what happens when my ideas change before I write my next report? That’s where my Daily Updates come into play.   

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