Five Reasons Gold Has Been Dropping and The Most Likely Reason of All is # 5

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Published : March 26th, 2014
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Category : Market Analysis
Last nights website update gave 1318-1328 as 1st resistance and the high so far is 1318. Support was listed at 1290-1300 and the low so far is 1306.

For those trying to understand why gold might be dropping so far so fast, let’s go over the potential’s.

First there’s the April contract that ends futures trading on the 31st and the rollover to June is underway. Not always, but often there are price weakness observations when some sell the April but don’t roll to June right away. They try for a 20-40 dollar lower price. Perhaps that is what is going on so far this week. In any event, we need to beware.

Second is the short term cycle low is due the March 30th (plus or minus 72 hours). That puts the window open on Thursday March 27th for a low. Can it come early or late ? Yes, of course. This window is the standard deviation between the ideal date for the lows. (The last blue cycle was on the exact day --- March 16th).

Thrid, the seasonal was late for gold (not silver) but now it has made up the time in price. A low is due this week/next week.

Fourth, and what we always worry about --- LIQUIDITY (a la 2008). See below article. In itself it’s not panic yet, but things are worrisome in China. You’ve heard of the COPPER plunge as they use it hypothecate loans. (Do you think they don’t use gold?). I don’t have that answer, but if they do, it sure is a good reason why gold is down 90 dollars in the past 6 trade sessions. 

What A Bank Run In China Looks Like: Hundreds Rush To Banks Following Solvency Rumors
Submitted by Tyler Durden on 03/25/2014 - 11:22

Curious what the real, and not pre-spun for public consumption, sentiment on the ground is in a China (where the housing bubble has already popped and the severe contraction in credit is forcing the ultra wealthy to luxury real estate in places like Hong Kong) from the perspective of the common man? Hundreds of people are rushing today to withdraw money from branches of two small Chinese banks after rumors spread about solvency at one of them, are sufficiently informative about just how jittery ordinary Chinese have become in recent days, and reflect the growing anxiety among investors as regulators signal greater tolerance for credit defaults.

OUR FINAL REASON --- is the MOST LIKELY--- AND THAT ONE ALONE COULD ANSWER ALL OF THE DECLINE.

Fifth, April Gold Options expiration is---drum roll---on mid Week Wednesday. What a perfect time to blast gold under 1300 ---- clear out the holders and the final set of stops --- and then move higher beginning on THURSDAY --- the first day of the short term cycle window. How many times have we seen this in the past? 
MANY.

In summary, gold has a whole lot going on underneath the price levels. Once this correction is complete from the March highs, another leg up can develop in April/May. The one sticking point---if we go into a liquidity panic due to China, all bets are off.


Gold chart
There’s a plethora of gold points to pick for support. The 38% FIB retrace (1311), the 50 and 200 day moving average cross (1298-1302), the 50% Fib retrace (1286) or the LOWER GOLD CHANNEL LINES. (1272-1280) The white dotted lines point to the 1292-1306 area and we did hit the first line today at the lows.

So far the PATTERN is strong on the downside. IT has spent 24 hours trying to make a low at the 38% FIB area (1308-1312) and held 1308 until NY this morning. The question now becomes is whether gold makes its low at the 50 / 200 day cross at 1298-1303. While that is viable, it is also WELL KNOWN THAT ALL ARE WATCHING IT. I would think that the CONTROL BOYZ would spike it below that point to clear the stops. And there’s one more point --- OPTIONS EXPIRATION. Do the BOYZ throw it to 1280 to clean out the 1300 call holders? With expiration on WEDNESDAY --- it would be the perfect setup --- and with the short term cycle window opening on Thursday --- it might be the time to buy it if they send it to 1272-1286. Resistance is 1318-1322 and support is 1298-1305 or 1272-1286.  In summary, cycle lows are due between Thursday and Wednesday of next week.   IF we hit the 1272-1286 area, we think its a buy trade for the short term.  It would be best if this low was made during the next short term cycle turn that is due (March 30th - plus or minus 72 hours).

24hGold - Five Reasons Gold Ha...


No TIME FOR SILVER TODAY --- IF WE LOSE 1983-1990 THEN LOOK FOR 1938-1973 AREA.

Data and Statistics for these countries : China | Hong Kong | All
Gold and Silver Prices for these countries : China | Hong Kong | All
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Bill Downey is the editor of www.GoldTrends.net where he monitors the price patterns on an hourly, daily, weekly and monthly basis. He offers commentary on what it all means along with support and resistance levels along the way in advance of each day's trade. If you would like to join for 30 days he offers a free trial. Visit his website home page for details.
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