Is A Bigger Drop In Gold Just Around The Corner?

As expected, after the applauded increase, gold fell. But will it manage to bounce off the bottom or rather slide lower?

Today’s analysis is going to be all about gold, and for a good reason. Based on yesterday’s and Monday’s sessions, November is now a down month for gold. Please let that sink in.

Gold ended last week above $1,850, with almost everyone in the market cheering and making bets, on how soon gold will move above $1,900 and then rally to new yearly highs. It was after the completion of the inverse head-and-shoulders pattern, after all!

Well, I warned you that there were more long-term-based factors in place than the above-mentioned inverse head-and-shoulders pattern, and since longer-term patterns are more important than the shorter-term-based ones, the outlook was bearish, not bullish.

In fact, it was the very short-term rally that made the outlook bearish, because of three separate time-based indications for a reversal. And I don’t even mean other bearish indications like gold’s invalidation of the small breakout above the declining red resistance line.

Two of the indications that I described previously were the triangle-vertex-based reversals based on the below chart.

When resistance and support lines cross, markets tend to reverse their previous course. There’s no good logical explanation for why it should work, but it does. Not in every case, and I’m not promising that it will work in all cases, but I’ve seen it work so many times in the precious metals market so that I can say that ignoring these indications is a very costly endeavor.

Another indication came from gold’s long-term chart – its cyclical turning point was pointing to a major reversal, and the preceding move was up. Consequently, gold was likely to top.

And that’s exactly what it did. Gold moved lower this week and taking into account the weekly high to yesterday’s closing price, it declined by over $100. Not bad for just two days.

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Disclaimer: All essays, research and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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