Here is a long-term view of gold (courtesy of Break Point Trades):
Gold has come up right against trendline resistance around the $1681 level. Not only is this area key in the chart above, it is also one of the Jim Sinclair angel prices, the importance of which I discussed here last week. To me, it is make or break time in the gold market, and I believe the $1681 price level may foretell gold's short to intermediate term price direction. An emphatic close above this price would surely be bullish in that time frame. On the other hand, if this resistance area holds and gold cannot move through it, that would be bearish and suggestive of a move lower.
Tonight while I was meditating on the chart above, the price action between August of 2007 to November of 2008 caught my eye. Take a quick look at the Federal Funds Rate during this time period:
As the Fed lowered rates and cheapened the dollar to fight the sub-prime meltdown and financial crisis in 2007/2008, gold took off and advanced approximately 43% (from ~$700 to $1,000) in less than 6 months! Despite the wildly bullish fundamentals for gold during this period of time, the gold chart above says (at least to me it does) that overbought conditions need time for repair. Healthy markets back and fill. Healthy markets consolidate and take their sweet time to do what we expect/want/demand them to do. Gold roared from $700 to $1000 in a little over 5 months, but it didn't best that level for a year and a half. In the interim, gold corrected and re-tested the original breakout price point around $700! Much like that time period, gold in 2011 bested the all-important ~$1445-$1450 level (after flirting with that area for months) in April and advanced quickly to ~$1930 by September.
This brings me to the point I'm making tonight, and the point I've been making during the month of January: Gold can still correct and consolidate here and it is perfectly alright! Welcome even! We gold bugs have enjoyed such a nice and steady price advance since late 2008. I get the sense that John Embry, Ben Davies Egon von Greyerz think that the bottom is surely in for this correction. While they have more knowledge of the markets than I may ever know, I think it is prudent to think like a contrarian at all times.
To me, the move in gold from $1522 to $1681 from late December to today looks tired and in need of rest. Some fibonacci moving averages are shown and would be logical areas of support if gold stalls here. Here is a zoomed out 30-min chart from FXstreet:
I'd like to end my comment on gold with a bit of an explanation. I'm not a gold bear, nor am I short gold in any way whatsoever. At worst, I'm a gold bull that would love to see lower bullion and gold share prices. Despite my bearish near to intermediate term view, I am not advocating getting cute and going short. Nor would I ever recommend trading in and out of a bullion position. Please do not misconstrue the viewpoints expressed in this forum as anything but an attempt to examine markets from a contrarian and sober-minded viewpoint.
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