Gold Tests New Support Level

NEW YORK (TheStreet) -- As gold has halted its run to an all-time high of 1,070.37 and activated corrective pullbacks, all eyes are now on the 1,030.85 level, its 2008 high where a reversal of roles is expected.

This present decline is coming on the back of a loss of momentum at the 1,070.37 level on Oct. 14. Since then two failed retests were seen on Oct. 20 and Oct. 23 before the current weakness. Though gold remains biased to the upside medium to longer term, its present corrective down move is expected following its recent rally.

The proof of whether a top is now place will be determined by how it reacts at the 1,030 level and its long-term rising trendline currently at 991.50 drawn from the 681.72 level.

We believe the first defense at the 1,030 level should turn off the commodity if tested as a role reversal rule (a broken support turns to resistance) should play out here.

However, if gold snaps below that level, its minor support sitting at the 1,024 level will be targeted where a negation and penetration there will create scope for further downside pressure towards the 991.50 level.

The commodity remains supported by its daily statistics and RSI which are both bearish and pointing lower. On the other hand, to invalidate its current downside weakness, gold must break and hold above its all-time high at 1,070.37.

Beyond that level there is the big psycho level at 1,100 ahead of the 1,150 and then the 1,200 level. The latter level falls within our three months forecast.

Gold Weakness Relative to the Start of the Recession Source: FXtech strategy.com