Gold failed to punch through the $1,696 - $1,696 major resistance level on Wednesday to show $1,700 once again. The inability to do so alone caused investors and traders to lighten up long positions, as we saw a very sharp sell-off at the close in Europe.
(Related: Will Gold End 2013 Higher or Lower?)
Although major resistance was not broken during Wednesday's session, it closed right above it, and continued lower last night. Last night's low was $1,675, which puts it below the next support level. After seeing support at the $1,682 - $1,684 level for days, this will now be a tough area to trade back above, and we expect to sell the first test. At these levels, we are likely to see a consolidation that can extend as low as the $1,667 area. However, we maintain that only a close below $1,666.4 will signal a reversal that would press the market another $20 lower. However, a close below $1,641 should send this market down to test $1,600.
If you followed Tuesday's short gold trade, you are short from $1,684.0. Roll your stop down to break even at $1,684.0. Our price target remains $1,668.
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