If the 200-day is recaptured quickly, it could mean a shallow correction for gold. But if that key moving average is not recaptured in short order, it likely means gold prices are in for a longer, deeper correction process.
Gold prices often move inversely to the U.S. dollar, so that is a wild card in this scenario. In recent days, the euro has been very weak and there has been a flight-to-safety into dollars. If the debt situation in Europe continues to deteriorate I would expect the dollar to continue to act as a safe harbor. But I also wouldn't rule out EU officials making more announcements about "plans" to deal with the crisis which could continue to prop up their currency.
The next chart is the longer-term chart of the GLD going back to 2009. You can see that this is the first time that the long-term moving average has not held as support going all the way back to the early breakout in gold in 2009. So the recent price action is meaningful and as such I plan to keep the GLD front an center on my screens for the near-future.
For the time being, we have not trimmed any of our positions but will likely lighten up on future bounces.
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