Gold has been oddly interesting lately. Take a look at the chart below, and note in particular two items: first, see the magenta-tinted area in which gold briefly breaks below support. I think that’s a pretty interesting “tell’ that this support isn’t that solid. Second, look at the green-tinted area where gold should have kept marching higher; it didn’t.
To me, that’s also a “tell” that there isn’t real strength behind the metal.
Not to say that it’s some amazing short setup; I am short gold, but I don’t really expect it to grind much farther south than $1230 or so. All the same, we’ve been stuck in a range for a while now (Market Vectors Gold Miners ETF (ARCA:GDX) has been trapped in a fifty cent range for six days straight). Looking at the Gold Bugs Index, one could still argue for an inverted head and shoulders pattern, but that right shoulder looks prone to failure. If we break that green tinted zone, it’s bye-bye pattern time.