Next Stop for Gold
01/12/2010 12:01 am EST
Despite the deep bearish correction that occurred in spot gold (a daily chart of which is shown) in the month of December, price action has begun what could turn out to be a significant rebound as of the beginning of 2010. This occurs within the context of an overall, continuing uptrend.
The December bearish correction brought price down to a key 61.8% Fibonacci retracement level at around 1074 (the low-to-high retracement span being measured from the low on October 2, 2009 to the all-time high on December 3, 2009) before bouncing up off this support region. In the process of this bullish bounce, price also broke out above a steep downtrend resistance line that represents the drop from the all-time high. Currently, price action has approached short-term resistance around the 1141 price region.
Further bullishness on the rebound that breaks out significantly above the 1141 resistance region could target a retest of the all-time high resistance around 1225. To the downside, within the context of a continuing uptrend in gold, key support remains in the 1070-1075 price region.
By James Chen, chief technical strategist, FXSolutions.com