Gold futures have continued the recent bearish trading this week. It broke and closed down below key short-term support last week at 1240 and have continued to disappoint the hopeful bulls by trading as low as 1214.20 earlier Friday before bouncing very slightly heading into 2 p.m. EST.
Technicians note that gold has one possible support level at 1220.25 on a closing basis. A close below that level will open the door in the very short-term to a continued slide down to 1208.
The ultimate downside test for gold will come at the 1183 low from December 2013. A close below that level will be a crushing defeat for the bulls and would likely lead to a cascade lower to points south of 1100.
The weakness in gold clearly has its roots in the persistent recent strength in the U.S. dollar. More than that, however, gold may be getting sold off as inflation does not appear to be anywhere to be found, as everything from grains to softs to metals to energy prices seems to be on the decline in terms of prices.
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