Gold - Technical Strategy

GOLD (Futures): Gold remains biased to the downside nearer term as it weakened into 2010 following its loss of upside momentum at the 1,226.60 level in early Dec'09. Its losses on a monthly closing basis in Dec'09 is the strongest and sharpest since Oct 2008 when it saw a low of 1.681.43. With that said, the commodity looks for further downside towards its strong support at its Mar 16'09 high at 1,032.60 where a reversal of roles is expected to turn the pair higher again. If however that level is decisively violated, we should witness further downside towards the 1,000 level its big psycho level with a turn below there accelerating further downside towards the 986.58 level , its Oct 02'09 low. Its weekly RSI and stochastics are pointing lower supporting this view. On the upside, its Dec 17'09 high at 1,141.68 comes in as the initial support with a break above there targeting the 1,168 level, its Dec 08'09 high. Below the latter will clear the way for further upside towards the 1,226 level, marking its 2009 high where a clean break will trigger the resumption of its broader longer term uptrend now on hold. On the whole, while we still retain out longer term bullishness on Gold, the presence of a shooting star candle(top reversal signal) and subsequent declines has put risk to the downside towards the 1,032.60 level or even lower.

Weekly Chart: GOLD