Weekly Analysis 15 Apr ~ 19 Apr

On last Friday morning we assumed that we might had a bearish flag and suggested that day the price may follow the direction of the break, more than we or anyone anticipated, the price broke well and slid down to 35755 before closing at 35871, 1789 points (4.75 %). This is one of the biggest loss since Sept. and December of 2011.

Will the highlighted pattern be repeated once again at this level ?

Let's look at some Fundamentals.

An answer to the question above is a bit difficult considering the Fundamentals like US Economy showing recovery as mentioned in FOMC Minutes that many participants expressed the view that continued solid improvement in the outlook for the labor market, which could prompt the Fed to ease the QE and most of the market analysts assumption that in order to tackle the Economic Crisis in debt-ridden countries in EU they may use their gold reserve as well.

# While Cyprus gold sale in itself is small, heavily indebted euro zone nations such as Italy and Portugal could also find themselves under increasing pressure to put their bullion reserves to work.

#"If Cyprus can break the gold market, then there are many reasons to be worried, with Slovenia, Hungary, Portugal, Spain and Italy in line," Milko Markov, an investment analyst at S.K. Hart Management, said.

#"It is a make-or-break moment for gold.. if the market can't handle the reallocation and Cyprus, then there is really a need for a bear market." -taken from Reuters.

Cyprus considers gold sale as an option to raise about 400M euro, representing 4 % of the 10B euro package. It holds 13.9 tons of gold worth of USD 697M. In order to raise 400M euro, the government might need to sell as much as 10.4 tons. It raised a concern that other debt-ridden countries might do the same to finance the loans. Concerning other Eurozone countries, Spain holds 281.6 tons of gold, making up 29% of its reserves while Greece's holding of 111.90 tons and Portugal's 382.5 tons, takes up 82% and 90% of their reserves respectively. Note, however that annual sales within the Eurozone are still capped by the CBGA at 400 tons, until September 2014. Sales for the current year are remained below 4 tons, well lower than the allowance. - taken from oilngold.com

Back to Technical

The level it is currently at 35775 itself is a very important one. If for any reason it gives up then price may extend further down to 34060 (61.8%), and 31660 (78.2%) Fib retracements.

If the current level holds and consolidates, 37500 would be the level it will have to deal with first. As long as these two levels hold, price will be trading in between this channel in coming days.

But remember, the price is now in Bear territory.

Trade Safe :)