About the latest gold price take down: Don’t look a gift horse in the mouth

Yesterday’s takedown in gold was impressive to say the least. Literally the second that Ben Bernanke started giving testimony to Congress the selling started. Within minutes the price had dropped by $50 and at one point the fall was over $100 – falling as low as $1687.

The timing of the move was immaculate – it was the last trading day of the month. Monthly closes are very important on a technical basis and going into the last day of the month gold was sitting at some very bullish levels.

Back on Monday we spelled out what those levels were and the importance they would have for March. It would’ve have been £ gold’s highest ever monthly close and it would have been € gold’s highest monthly close ever also.

But the sellers came in and came in hard and took down gold fast – when the dust settled gold managed to close the month just above $1700 (£1069, €1325).

Gold $:

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Gold £:

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Gold €:

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This morning the gold price has moved a little higher and is about $25 higher than yesterday’s lows. There is much speculation about the cause of the sell-off, chief among them is the idea that because Ben Bernanke in his testimony didn’t explicitly say that the Federal Reserve would undertake more money printing (QE).

But this cause for the sell-off doesn’t make much sense because the bulk of the selling happened in seconds before Ben Bernanke had even uttered a few words – if the selling really was down to the Fed Chairman not committing to more money printing then you’d expect the selling to be more gradual at first getting faster near the end of his testimony as investors realized that Ben Bernanke wasn’t going to commit.

Rather it seemed that it was a very opportune moment for those who want to control the speed of the rise in the price of gold (slow and undramatic) to take it down. Remember that gold was sitting at those very bullish levels at the end of the month after rising some 15% for the year so far – it was perfect timing for a takedown.

So where does that leave investors? Gold is still up above 10% for the year and gold is holding the old support level $1704. However the powerful move that looked like was in the offing for March if we closed the month at those higher levels seems to have been delayed – the crucial question is for how long?

That’s impossible to know, but it does show us just how fast gold can move in either direction and that is something that is going to get more and more pronounced as this year marches on.

Gold just had a rather dramatic ‘sale’ and how long it will be offered as these discount levels is anyone’s guess – but because the fundamentals haven’t changed a bit and are improving almost daily don’t look a gift horse in the mouth.

Link to this article: : http://www.goldmadesimplenews.com/gold/about-the-latest-gold-price-take-down-don%e2%80%99t-look-a-gift-horse-in-the-mouth-6254/

Posted by on Mar 1 2012. Filed under Analysis, Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

1 Comment for “About the latest gold price take down: Don’t look a gift horse in the mouth”

  1. I don’t understand because everyone is saying that only QE is when the federal reserve increases the money supply and their balance sheet but this isn’t true is it? They do it all of the time.

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