Technicals | Jul 20 2010
By Rudi Filapek-Vandyck
The TechWizard has some very bad news for the world's gold enthusiasts: gold is in a correction phase, and this phase is likely going to last several more months, not days or weeks.
At the moment, the gold price is sitting on key support in the form of the 20 moving average (M/A) on weekly price charts. This is an important indicator for medium term trend direction, the Wizard adds, but prospects are not looking promising.
He has observed the weekly M/A has held up price action since January 2009, which has fueled the metal's bullish momentum. He adds that every time the gold price dived below this trend line it has proved to be a good buying opportunity.
For the time being, the Wizard's bias is to the downside. He suspects M/A support won't hold and gold could be on its way to US$1025/oz quickly if his gutfeel is correct.
The TechWizard suspects the correction phase for gold this year might last 6-9 months, similar to what happened between March-December 2008. At that time, gold eventually also fell through M/A support and subsequently fell much lower. The Wizard believes a decent correction is due, and it won't be a bad thing in itself, setting up gold for the next leg upwards.
The TechWizard is the pseudonym of Scott Morrison, whose experience in financial markets exceeds twenty years. Morrison operates his own website nowadays at www.techwizard.com.au The views expressed above are the TechWizard's, not FNArena's (see our disclaimer).
