zentrader.ca / By Poly / January 26, 2013
Friday’s move lower in gold was not what I had expected. At least what I didn’t expect was for gold to close near its lows, as I would have been fine with a midday reversal and a close back near the 20dma. My expectation earlier in the week was for a drop down to $1,670 with the $1,660 level acting as a floor to the Half Cycle Low. So to see gold close below $1,660 is a negative development.
But for now that should have been the extent of the Half Cycle decline and a sharp bounce should unfold. It’s the move out of this low that I will be closely watching next week, as a failure to rally strongly will indicate that Gold is yet again in trouble.
Part of the reason why I held up passing judgment on the gold Cycle on Friday was the performance out of Silver. I pay very close attention to Silver’s day to day performance as I find it to be an excellent proxy for gold’s overall direction. It’s not always a rule, but generally Silver leads gold both to the upside and downside.