For those of you who like to review charts, the gold market setup is very interesting at the moment.
Take a look at the chart below and notice the base that has formed since the early August peak in gold prices. Yesterday, sellers pushed gold prices below this important support level. Interestingly enough, buyers stepped in late in the trading day and saved what could have been a disaster for long-term gold investors.
To recap, sellers attempted, either legally or illegally, to trigger stop orders place by buyers just under the red support level. Traders call this behavior a washout day. It is common practice for short sellers to target and attack support levels like this. Unfortunately, some weak investors sold their positions into yesterday’s broad market selloff, only to see prices recover later in the day.
Conclusion
The gold market is at a critical cross road. Long-term investor’s had better hope the support level holds. If the GLD fails to hold the $177.50 level gold prices are likely to decline another 5% at least!
