Near Term Case For Gold

January 13, 2012

5:45pm CST

Just for review, here is my outlook on gold as of 12/14/11:

http://equitybriefcapital.wordpress.com/2011/12/14/a-technical-look-at-gold-2/

As you can see from the chart below, there is quite a bit of resistance between $1675 and $1700 just based on trendlines and moving averages (the 150 day was key as it had held for almost 3 years and gave way in the most recent downdraft). In addition, $1700 is the 62% retracement of the leg down from $1804 to $1524.

Gold hasn’t performed well on a relative basis either. In fact, it has been in a downtrend vs. the S&P 500 since mid-August. I want to see the relative strength here begin to improve before re-entering the position.

While I still believe in the secular bull market in gold I am near term neutral. It has already had quite a run off of the lows and is now approaching key resistance at $1675-$1700. I have my doubts it will break through that big resistance zone on the first try.