At present, the downtrend has a firm grip on this market. However, with some larget commercial traders already net long, this could be a suckers breakdown to bring short sellers in before handing their heads to them on a plate.
Action in gold today is not looking nice. A key level is $1283 which is the 38.2% retracement level both of this little relief rally during Jult and of the ENTIRE bull market since 1999. The chart below, as of the weekend, showed a bounce on Friday from that very level: $1282.60:
However today, Monday 6 August, the market is back near that $1283 support and below the key $1300 level. $1300 is important recent support and a key century level. A failure at $1300 would be similar to the failues at $1600 and $1500 that heralded almost immediate crashes in mid April and late June. Each of those showed a small head and shoulders formation with the right shoulder failing and going straight into a vertical crash, as shown clearly above. This time the formation is not quite the same but we could easily have a H&S formaion forming over the next few days and then a crash as twice before.
On a drop my initial target would be $1180, because in a few days time, that level meets a parallel that marked two lows since mid May. There is an opportunity for a big move lower to the point where those lines meet in about a week's time.
See the 3 brown circles in the chart below - the third one could result in a double bottom at $1180.
Of course, there is no guarantee that any downturn would stop there. It could go to the next and bottom level of the downtrend channel, going off the bottom of the chart to $1040-1100, depending on the timeframe.
Actually, I am really getting very tired of the cheerleaders in the gold market who are conning the public into buying at these levels, as they also did at $1900, $1800, 1700, $1600, $500, and $1400. Also, many gold and precious metals pundits have already turned bullish again, even on this relatively measly $169 rally that is already failing here. The $169 rally compares against roughly a $620 drop sincel last September or if you want to see it in real perspective, a $720 drop since the top of $1920 in early September 2011!
At present, the downtrend has a firm grip on this market.
16:10 BST 6 Aug 2013.