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Technical Analysis of Gold

On the morning of the 6th of September 2011 many traders woke up with a feeling of excitement: they were sure this would be the day that gold breaks through the $2 000 barrier and head for untold heights. After all, the uncertainty that caused the latest bull run in gold was intact, the Euro debt crisis still simmering like an evil brew.
This was not to be: the price opened at 1901.85, marginally higher than the previous day’s closing price, and briefly moved up to 1921 – but then it started dropping – and dropping more. At one time it was trading at 1859.85. When it finally closed at 1875.10 all of us who were long on gold heaved a sigh of relief.
The worst was yet to come. Since then it has done little but drop. On the 21st of September it entered the Ichimoku cloud (see Fig. 10.11(a)) and continued dropping until it emerged downwards from the cloud on the 23rd of September – a dark day for traders during which gold lost nearly $100 on a single day.

Sure, we’ve seen somewhat of a correction since. The current price of 1686.75 is significantly higher than the recent low of 1532.65 we saw on the 26th of September.
This is still far below the Ichimoku Kinko Hyo cloud though. The green Chinkou Span line is also still far below the price of 26 periods ago – confirming that we are still in the grips of a bear run.
The fact that the price is somewhat above the red Tenkan Sen line simply confirms that we recently experienced an attempt by the bulls to restore the previous trend. This is not enough to prove anything. The bull market can not be considered restored before we do not see a clear upwards break from the Ichimoku cloud that forms a new high.
This is very far away indeed. For now we might at best see a sideways movement. Any new low could be an indication that a renewed bear run is on the way.
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