Like all other risk assets, gold (in USD per ounce) has rallied since the late October low, moving from $1600 to nearly $1800 an ounce.
Today’s chart shows a likely repeat of the September rebound move from the August correction in gold, as it hits significant psychological resistance at $1800 USD per ounce:
A technical explanation – I use a combination of short term patterns and indicators to formulate a trading position. The August high was captured by what I call a “KC Signal” and confirmed by the falling wedge pattern (note the two converging, falling red trend lines). The target for any correction in gold (i.e the price at which you should cover your short!) is its long term moving average and trend line, marked in pink and green respectively.
This is seen more clearly on a longer term, weekly price chart:
The current price action mimics the failed ascending triangle (uptrend in green, resistance above in orange) in late Sept-mid October, with a failure target of $1680 (previous resistance) then approx. $1600 at the long term moving average/trendline intersection.
At the moment, it does not pay to have a very large short position in gold, but as the left handside of the weekly chart clearly shows, during a credit crisis, gold is not a good short term hedge. The USD still remains supreme in that case. For now.