It Doesn't Always Go Up...

Yesterday's spill in gold, although mostly erased in the afternoon, continued last night; spot gold bottomed at just above US$1200/oz just before 8 PM ET. As I write this, spot gold's at $1202.50. Marketwatch credits thebulliondesk.com with the sensible observation that profit-taking was responsible. Gold's been up the previous three days, and was due for a pullback.

A Reuters poll, though, indicates that the profit-taking may go further. As reported by the Globe and Mail: "In a survey conducted between Monday and Wednesday this week, 18 of 34 analysts, traders and funds said they expected prices to fall below the psychological marker [of $1200]." The same report notes that gold's been up by an incredible 60% in the last twelve months.


As it turned out, $1200 didn't mean much when the price rose through that level. On the other hand, the number itself is still widely known. A "support level" is a price at which a lot of new demand is called forth, often sufficient to keep the price from falling much below that level. Last night's action indicated that $1200 is a support level for gold, but such a level is no insurance against a further fall. The next few days will tell.

(This thumbnail description of support levels owes a lot to the writings of the late Harry Browne, as did my earlier one on resistance levels.)