Gold plunge pauses but downside risk remains
James Chen, CMT November 15, 2016 3:48 PM
From a technical perspective, the past week has seen the price of gold break down below major support at $1250 after a short-lived, risk-driven spike to the upside during the night of the US presidential election a week ago. The post-election plunge followed through on that breakdown, landing most recently on Monday at the 50% Fibonacci retracement of the uptrend from the December 2015 $1050-area lows up to the July $1375 high. During the process of this recent plunge, gold’s 50-day moving average crossed below its 200-day moving average, forming a relatively rare and highly significant bearish indication known as a “death cross” pattern.
In the likely event of a continuation of gold’s decline in the run-up to the Federal Reserve’s December meeting, a breakdown below current support should meet further support immediately to the downside around the psychologically significant $1200 price level. Any further move below $1200 would constitute a major bearish breach, potentially opening the way for a significantly deeper fall towards the $1150 support area.
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