Gold...Why This Pullback is Different

By: Guy Lerner | Mon, May 31, 2004
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All the postings this past weekend about gold have made me take second and third looks at the price action. There are a lot of persuasive arguments for and against the yellow metal. But let's put all the fundamental and geopolitical issues aside for a moment, and look at gold from a purely technical perspective. Figure #1 is a weekly chart of the price of gold.

The only thing I have done to the chart is add a 5 bar moving average of price to clarify the price action. I have put lines under the down thrusts that formed support or pivot points. What should be apparent since the bottom was made in April, 2001 is that this current pullback is the first down thrust to trade lower than a previous pullback. In other words, support was broken. In classic technical terms, this an "M" type top. Support now becomes resistance which is about at $400. This is why this pullback is different! No other pullbacks violated a prior low.

Figure#1/ Gold (weekly)

Let's take another perspective and look now at figure #2, and ask yourself would this chart make me bullish or bearish. I hope you answered bullish. Figure #2 is a chart of gold inverted. Therefore, the only conclusion to make is that if you thought this chart is bullish then a chart of gold must be bearish. The trend has changed and it is down.

That is The Technical Take!

Figure#2/ Mystery Chart (weekly)

The Technical Take

$ gold in down trend

$ resistance is at $400

Thanks for reading and I hope you have found my analysis informative, insightful and profitable....

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Guy Lerner

Author: Guy Lerner

Guy M. Lerner

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