GOLD Price Support

The gold price shown on the New York Mercantile Exchange Gold chart has unusual behavior. The price behavior is dominated by strong trends which are interrupted by strong support and resistance levels. There are four important support and resistance levels. The lowest of these is located near $790.00. This is not a well defined support level so it is more effective to consider this as a support area.

The next support level is near $885.00. This is well defined and has been tested and retested.
The next support resistance level is near $925.00. This was a strong resistance level in 2008, September and October.

The highest resistance level is near $1000.00 This is an important psychological level. When the American market collapsed in 2008 January this was the peak area for the gold price. The retest of the $1000.00 level again in recent weeks indicates there are significant problems with the American economy.

Support and resistance analysis suggests the retreat in the gold price will find good support between $885.00 and $925.00. There is a high probability of a rebound from this area and a retest of resistance near $1,000. A successful breakout above $1000,00 has a first target near $1,075 and a second target near $1,115. The long term breakout target is near $1,210.

The recent retreat from near $1,000.00 found a support level provided by the uptrend line which started in 2008, November. The retreat has broken the up trend line and normally this is a signal for a new downtrend to develop. A new short term downtrend line starts with the high point on 2009, February 20,. It touches the high point on 2009, March 13. The value of this trend line is now near $911.00.

Three features show a continuation of an uptrend rebound. They are:

• A close above the value of the short term downtrend line near $911.00.
• A move above the longer term uptrend line. Current value is near $915.00.
• A move above the resistance level near $925.00

The first target for a successful breakout above $925.00 is resistance at $1,000.00. A fall below support near $885.00 is bearish. The next strong support level is $790.00. The short term downtrend line crosses the $885.00 support level near the beginning of April. Traders will watch carefully for evidence of a bullish rebound or a continuation of the downtrend. Gold has a confused chart behavior so traders watch for price to move above or below the significant price levels before they take action.

To read more articles and commentaries from Daryl Guppy, click HERE

****

Daryl Guppy, well-known international financial technical analysis expert. Appears regularly on CNBCAsia and is known as "The Chart Man". He is an equity and derivatives trader and author of books including Share Trading, Trend Trading and The 36 Strategies of The Chinese For Financial Traders. He has developed several leading technical indicators used by investors in many markets. His weekly analysis newsletters get favorable comment in Asia and Australia.