1180

As the chart shows, Gold is closing in on major support around the 1180 level. Two things are working against the contract. First, the candle formation for last month and this month is considered a reversal in my book (not overbought but from a new high). If the previous highs are taken out as shown by the trendline drawn on the chart, we would have technically a false breakout. Further, false breakouts are usually rally killers which argues that gold, if 1180 is taken out solidly, may have seen the highs for not only the short term but the long term (ie a couple of years). Yet again, with this market, we do not have a long term anymore and have to react more quickly!

In any event, if 1180 is taken out, it argues that gold heads back towards the sub 1100s (roughly around 1080) and a break there argues for a move below 1000 and then 875. Trend models that I use (and not on this chart) still argue that the trend is higher so if this major support is taken out and a false breakout is confirmed, then many will be running for the hills at the same time because the trend is perceived to still be higher - something that candles do not care much about! One more thing: FoxNews broadcasts are littered with those who advertise to buy gold. I know it is not a contrary signal till it is but the conditions are in place for a sustainable move lower. With that said, if 1180 holds and a bounce is seen, I could be inclined to go long!

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