The gold price is holding steady around the $1700 level after testing the $1680 level. This is something we cautioned about last friday:

A note of caution however, should $1710 fail on a closing basis gold would very quickly retest the once resistance level of $1680 – this level would be a ‘must hold’ level for the bulls because if $1680 would break down then $1600 would be back in a blink of an eye and technicians would be pondering if a bearish head and shoulders pattern was being formed.

The $1680 level has held for now:

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It’s worth also noting that the 150 Daily Moving Average is now sitting at the $1647 level.

The reason for the sell-off seems to be a broad based sell off in the equity markets which have now fallen some 7% since their early November highs. Again the reason for the sell-off in gold at the same time as stocks sell-off could be forced liquidation. Something we speculated might be happening the last time stocks and gold sold-off together, with John Paulson selling off some of his gold positions.

This turned out to be true:

John Paulson, the billionaire investor, cut his holdings of a popular gold exchange-traded fund during the third quarter.

It seems patience is going to be the key for gold investors as the world grapples with a clearly broken global monetary system and just how it is going to ‘fix’ it.

We are sure when the dust settles that ‘fix’ will involve huge amounts of printed out of thin air money… again.