The sharp sell off in gold continued yesterday, as gold failed to hold the 1220-1225 support zone and fell below 1200 overnight, hitting a low of 1180 before rebounding.

Gold is currently trading just above 1200 in one of the worst months and quarters on record for the yellow metal.

Our long term target of 1156 is now looming into view and will surely be reached very shortly, though the market is extremely oversold and could snap back at any time in a relief rally.

Equities, oil and the dollar are all climbing again as the pre-FOMC meeting trading pattern has resumed, with the worries over QE tapering being outweighed by expectations for economic improvement in the US.

Today's video for subscribers looks at the recent trading in more detail.

After hitting a near 3 year low yesterday, gold is attempting to form a bottom in the 1220-1225 support zone.  This morning, after making a "double bottom" in the support area, gold is moving higher and is currently trading around 1236.

Gold has dropped over $300 since crashing through major support at 1525 in April, driven lower by massive ETF redemptions, rising interest rates, an expectation of withdrawal of Quantitative Easing and improving economic conditions in the US.

The physical demand that swooped in to arrest the initial decline in April has not materialised on this latest price fall in what is historically a weak period of the year for gold.

A resurgent dollar is pressuring the gold price, and whilst the likelihood of a short term recovery rally are high, in the medium term the prospects for gold look bleak.  A test of 1156 looks a virtual certainty and a drop as low as 1000 must be considered likely.

However, once a bottom eventually forms, a powerful short covering rally should develop as the open short position in gold is at historically high levels.

Today's video for subscribers looks at the recent decline in more detail and our thoughts for our next trade.

After breaking through the bottom boundary of the "descending triangle" overnight, gold crashed $40 lower and is currently trading at 1230.

Gold is now closing in on support at 1220, a level that has not been seen for 3 years and only $70 away from our long term target for this decline at 1156.

Equities are moving higher and oil is recovering, whilst the dollar continues to surge higher, moving back towards key resistance at 84-84.50.  A break through this level will see gold under further selling pressure and suggest a potential move as low as 1000 in the yellow metal.

Gold is now very oversold and we suspect we will see an attempt at a bottom formed very soon, though the market is very fragile and could move significantly lower.

Today's video for subscribers looks at the recent decline in more detail and our thoughts for our next trade.

After a feeble bounce that failed to break 1300 on Friday, gold was on the defensive again yesterday, falling steadily to 1280 before finding support.  The market appears to be trying to form a bottom here and we would not be surprised to see a rally develop after the sustained sell off last week.

Equities and oil also fell hard yesterday whilst the dollar rallied - price action that is clearly signalling deflation.  This is most likely linked to the liquidity crisis in China, therefore a resolution to this problem will see stocks resume their uptrend.

However, we do not see the same outlook for gold over the next few months, as rising interest rates, low inflation and a perceived US economic recovery are all contributing to massive ETF withdrawals and a strong downtrend in gold.

We are now in the weakest part of the year for gold historically - it is unlikely that we will see a strong rally develop during the "summer doldrums" and a continuation of the downtrend is the most likely scenario until August at least.

Today's video for subscribers looks at the recent trading action and our strategy for our next trade.

Gold recovered on Friday after yesterday's precipitous decline, retesting 1300 and closing just under the round number on short covering ahad of the weekend.  This morning, gold has opened on a weaker note, declining alongside equities and oil, with the dollar trading higher.

This is a classic "deflation" trade and it is clear that the markets are reacting negatively to the anticipated withdrawal of Quantitative Easing (QE).  We believe that whilst equities and oil will recover on the basis that economic prospects will continue to improve, gold and silver will remain under pressure until the reasons for owning them (negative real interest rates, inflation, further economic stimulus, geopolitical upheaval) return to the fore.

With interest rates increasing sharply and no inflation, the real danger at the moment is not inflation but deflation and the markets are reflecting this risk.  Whilst the correction in equities is welcome and expected, a deeper and sustained decline would call into question the withdrawal of QE and could see a more dovish tone from the Fed to arrest the decline in stock markets.

We expect further declines following gold's drop below 1322, though a bounce here from an oversold position is likely.  Our ultimate target for this correction is 1150, which we would consider to be an excellent long entry point, though we cannot completely discount the possibility of a spike lower to 1000-1050.

Today's video looks at the recent trading in more detail and our strategy for our next trade.

Early trading yesterday morning saw gold plummet through key support levels first at 1338 and then at 1322 to reach a 2 ½ year low at 1276.  As usual when price breaks below a key support level you need to be quick to react, and we were – shorting at 1319 and closing out our position later in the day at 1283 for a decent $36 profit on the day. 

Oil and equities had equally negative days yesterday, with the DOW, FTSE and US Crude posting their biggest one day losses in many months.  We expect that, in these markets, the upwards trend will continue following these corrections…however the same cannot be said for gold!

Whilst we expect the bulls and bargain hunters to push up the price, closing the week out around the 1300-mark, we foresee more downwards pressure on the yellow metal in coming weeks - with price falling towards 1150…although this may take some weeks to unfold as trading volumes thin out through the summer.

Between 1300 – 1150 there is support at 1280-75, 1260, 1245, 1200 and 1180.  We are waiting and watching to see how the market shapes up before picking our next entry.

Gold started selling off sharply as soon as the FOMC statement was released, falling through the bottom boundary of the triangle around 1350 on confirmation that tapering of QE is expected to commence this year, with a complete exit from QE possible in 2014.

This morning, the decline has accelerated and gold has tumbled lower, crashing through support at 1338 and 1322 with relative ease and dropping as low as 1304.

We expect to see gold trade below 1300 today and we could see much lower prices now that 1322 has given way as we anticipated.

The dollar is moving higher on the back of the FOMC statement, as an end to QE will be strongly positive for the dollar, particularly as Japan and Europe are still expanding their balance sheets.

Oil and equities have fallen in a "knee jerk" response to the statement, though we expect both to continue moving higher after these initial falls on the basis that the US economy is recovering relatively more strongly than any other Western nation.

Today's video looks at the price action immediately following the FOMC statement and our strategy for our next trade.

Gold fell steadily yesterday as nervous traders closed out long positions in advance of the FOMC meeting statement released later today.

Gold fell as low as 1361and closed near the lows of the day, though remains within the triangle consolidation.  The lower boundary of the triangle is today at 1352 and the upper boundary is at 1402.

Whilst it is likely we will see some volatility immediately preceding and following the FOMC statement, it is unlikely to contain anything particularly new or "game changing" and as such, after the initial flurry of activity, we expect the down trend to resume and the triangle to break to the downside.  The narrowing trading range and triangle formation suggests a large move is coming soon.

Oil is powering higher through key resistance at $98.25 and looks to be headed a lot higher, with $106 our target for this rally.  This should help gold, trhoguh the correlation between oil and gold has recently been weak.

Equities are moving higher again after testing the breakout area around 1600 and we expect to see new highs shortly.  This will continue to divert funds away from the yellow metal and put downward pressure on the price of gold.

Today's video for subscribers looks at the recent trading in more detail and our thoughts on the FOMC statement.

Gold moved in a narrow range yesterday, drifting lower all day after making a high of 1392 overnight.  The low of the day was 1380 and the range was entirely within the range of the previous few sessions, as traders await the FOMC meeting statement tomorrow.

This morning, gold has opened lower and is currently trading around 1378.

The triangle consolidation is clear on the daily chart and we expect a resolution to the downside, as triangles most often break in the direction of the prevailing trend which is currently down in gold.

Unless or until the price moves back above 1525, we remain bearish on gold and expect to see significant declines this summer.  However, the speculative short position is extremely high - when the market turns upwards from a final bottom, an explosive short covering rally should see gold power higher in a very short period of time.

We are confident that a bottom is not yet in and expect to see gold trade below 1300 in the near future, with a chance of a spike sell off as low as 1150, or even 1050.  This spike lower would present an excellent long trade opportunity.

Equities are moving higher, which may explain some of the weakness in gold, whilst the dollar has stopped falling and is attempting to move higher from support around 80.70.

Oil briefly broke above key resistance at 98.25 yesterday, though has since fallen back a little.  A break higher should see a strong rally develop in oil which may help gold a little.

Today's video for subscribers looks at the triangle consolidation and our strategy for our current trade.

After a quiet day of trading on Friday in a narrow range, gold has started the new week with a negative bias in the face of strength in equities and the dollar.

Gold hit a high of 1392 and a low of Friday, the entire day's trading within the previous day's range (an "inside day").  Gold remains within a triangle consolidation, with the most likely scenario an eventual break to the downside, as triangles are most often continuation patterns, with the preceding trend (in this case down) continuing.

Oil has found some strength and is pressing against key resistance around $98 a barrel - a break of this area will be very bullish and suggest a rally in the short term to $106.  This would be potentially bullish for gold, though recently the correlation between oil and gold has been weak - gold has been influenced mainly by movements in equities and to some extent the dollar in recent weeks.

This week sees the FOMC meeting on Wednesday, where we will get an insight into the Fed's thoughts on the future of Quantitative Easing that could see a strong move in gold.

Today's video for subscribers looks at the triangle consolidation in more detail and our strategy for our current trade.