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Gold still not showing signs of life

The gold bulls are still not showing any real signs of life even as stocks continue to falter and volatility is on the rise. As the Dow Jones Industrial Average dropped over 230 points today, gold still did not see an influx of buying interest. Many believe that gold and precious metals could potentially see a rebound once investors begin to rotate out of equities, however, this has not yet begun on a large scale. Perhaps gold will need more downside in equities before seeing any real buying interest enter the market that could enable the yellow metal to put together a sustainable rally.

The gold markets has also been somewhat immune to headline risk in recent weeks. Protests taking place currently in Hong Kong may be rattling stock markets but thus far have also not driven any significant flight to quality buying in gold or precious metals. One has to wonder at this point what it might take to drive buying out of risk assets and into perceived safe-havens such as gold.

The gold market continues to suffer from an increasingly poor technical posture, and the charts look as if there may be more downside to go. A break below the $1185-$1200 area could be technically significant as gold will have then completed a bearish descending triangle pattern. Completion of this bearish pattern could potentially indicate another significant leg lower in gold prices that could potentially see the price of gold drop to the $1000 level. It will take a large effort and considerable upside by the bulls in order to negate the current bearish technical posture. That being said, the likelihood of a relief rally and short covering bounce in the near future seems to be increasing.

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02 Oct 2014 | Categories: Gold

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