Crucial time for gold!
Gold is currently severely attacking a long term support zone made up by the confluence of multiple support lines both horizontal and oblique. If the breakout is confirmed and the price respects the projected supports breakout series initiated early 2013 we can expect the price to drop as low as 970/ounce.
Though the technical picture is pretty bearish, the risk reward ratio to enter a long term short trade with a 970$ objective is not really interesting since the price is currently hovering half way between medium/long term key supports and resistances, respectively 970$, 1046$, 1345$ and 1404$.
The reason why the price drop is slowing down around this area is mostly due to a key fundamental factor. In fact the 1150/ounce area corresponds to the average global production cost which explains the strong support found recently around this area despite many breakout attempts.
One thing is sure, gold traders should expect a volatility burst from this level as there are a couple of conflicting fundamental factors that will decide of the precious metal price direction; the two main ones being the spectrum of deflation thus pressuring the price and/or the possibility of a global meltdown that would trigger a flight to safe haven assets.
Sophisticated traders with a long term view will opt to play a straddle buying ATM puts and calls with long term expiry.
Though the technical picture is pretty bearish, the risk reward ratio to enter a long term short trade with a 970$ objective is not really interesting since the price is currently hovering half way between medium/long term key supports and resistances, respectively 970$, 1046$, 1345$ and 1404$.
The reason why the price drop is slowing down around this area is mostly due to a key fundamental factor. In fact the 1150/ounce area corresponds to the average global production cost which explains the strong support found recently around this area despite many breakout attempts.
One thing is sure, gold traders should expect a volatility burst from this level as there are a couple of conflicting fundamental factors that will decide of the precious metal price direction; the two main ones being the spectrum of deflation thus pressuring the price and/or the possibility of a global meltdown that would trigger a flight to safe haven assets.
Sophisticated traders with a long term view will opt to play a straddle buying ATM puts and calls with long term expiry.
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