Today we are going to talk about what is happening with gold from a technical stand point. As we all know, gold had a huge drop back in late 2012, which ended towards the end of June this year. Gold went from a high of nearly 1800 down to just below 1200. This was a fairly dramatic move down, especially when everyone at that time was saying to buy gold. Since the low, we have seen a nice move back up over the last couple of months to reach a recent high of around 1440. Then in the last couple of days, we have seen a sharp drop from these most recent highs to end today around 1322. So the question is this, will the price of gold continue to drop or is this just a minor correction in the overall recovery from the lows? I would love to give you the answer, but, frankly, who really knows? With the events over in Syria, along with the overall global financial issues, we really don’t know what might occur to cause the price of gold to move back up or head back down. Time will only tell.
What we can do is to take a look at what the charts are currently telling us. When looking at charts there are many things we can see the price of gold possibly doing. There are an infinite amount of possible things that could happen. As traders, we need to not focus on what could happen but recognize what is happening on the charts that might be able to help us.
In the chart above, there are some things that we should be pointing out that might help us. The first thing is to identify the current trend or momentum of the chart. In this case, the current movement is bearish or, in other words, the price in moving down. In addition, the price is currently sitting near an area of resistance. Notice the horizontal line going back to April of this year. Whenever we see price sitting at an area of support we need to consider two things. First, will it bounce at the level and move higher and second will it break through this area and begin to move lower. Each move will be handled differently in our trading. If it bounces up off support we can look for an area to enter into a long position. If it breaks through we will want to look for opportunities to short gold. We shouldn’t really care what is going to happen as long as we are prepared to take the correct action for the price movement that does occur.
So, it really doesn’t matter what we thing might happen, what matters is that we are prepared for what does happen. Currently, Gold is at one of those tipping points where it will be making a decision soon as to what way it will move. Take some time to watch the chart and be prepared to trade it in the appropriate direction.