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Chart: Gold has been ‘Trumped’, here are the downside targets

Gold bullion bars and coins.
Getty Images
Gold bullion bars and coins.

The US election is not as scary as some gold bugs imagined. After a fall, and rebound rally, the gold price resumed its downtrend. Weeks ago we asked who stole the gold? Now we know the answer.

We re-assess the extent of the damage and the now limited potential for recovery.

We start with damage assessment. The fall below the historical resistance and support level near $1,290 is critical.

The rally was a dead cat bounce, and yes, we were caught on the wrong side of it.

The uptrend with gold was well defined using a Guppy Multiple Moving Average (GMMA) indicator. The long-term GMMA was well separated and this generally shows strong buying support from investors. The upper edge of the long-term GMMA was a little above the historical support level near $1,290. The first fall below the upper edge of the long-term GMMA was a warning. The second fall below this level is a decisive change in the direction of the trend. It cannot be ignored.

A continued fall below the edge of the long-term GMMA has support near $1,180. This is the current downside target. Failure to hold at this support level sets a target near $1,050.

This is now a change in the trend. Aggressive traders used the ANTSSYS method to trade the rally rebound and to cover and go short as the market collapsed below $1,300.

Chart analysis was Trumped, but traders survived by using good stop loss conditions. Chart analysis now gives the downside and support targets.

Daryl Guppy is a trader and author of The 36 Strategies of the Chinese for Financial Traders, available at guppytraders.com. He is a regular guest on CNBC's Squawk Box and a speaker at trading conferences in Asia, Australia and Europe.

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