As talks progressed in relation to the debt ceiling in Washington, gold drifted lower yesterday after making a high at 1291 in early trading.  This morning, gold has fallen sharply, crashing through Friday's low at 1261 and seemingly on its way to 1220-1225 in the first instance and likely a retest of 1180.

Certainly a resolution of the US budget crisis (and it is rapidly becoming a crisis) will see a relief rally in stocks and the dollar and further selling pressure in gold, with the almost perfect conditions for gold to prosper seeing only a muted response in the past few weeks.

Silver and oil are also weak, adding further to gold's woes, and the decisive break of the 61.8% retracement of the rally from 1180 to 1434 is a very bearish outcome.

Support can be found at 1250-1253, 1220-1225, 1200 and 1180 - a break of 1180 would be an extremely bearish development, suggesting a short term target of 1000-1050 and a possibility of a drop to 800.

Resistance can be found at 1290-1292, 1300-1305, 1322, 1330, 1353, 1375, 1400 and 1434.  A break of 1434 would be a bullish development and suggest gold was on its way back above 1500.

Today's video for subscribers looks at the recent trading and the implications of the break of 1272 for gold.

Gold tumbled on Friday on rumours of progress in the US Government deadlock, with the dollar moving higher and equities rising as well.

The price broke through the critical 1272-1277 support zone with ease, triggering stop losses all the way down to a low of 1260.  Gold recovered slightly into the close, though could not recapture the 1277 level.

This morning, gold remains weak and below 1277, even though the deadlock continues without end in sight in the US and equities fall back again.  This is a worrying sign for the bulls, as gold remains entrenched in a solid down trend despite the apparently favourable back drop and looks set to fall back to 1180 eventually.  Only a close above 1277 today or tomorrow would reduce the possibility of this outcome.

Support can be found at 1261, 1250, 1229, 1200 and 1180 - a break of 1180 would be an extremely bearish development, suggesting a target of 1000-1050 or possibly even 800.

Resistance can be found at 1292, 1300-1305, 1322, 1330, 1353, 1375, 1400 and 1434.  A break of 1434 would be a bullish development and suggest gold was on its way back above 1500.

Today's video for subscribers looks at Friday's action in more detail and the implications of the recent trading.

Gold traded sharply lower last night as news of a potential resolution to the "debt ceiling" in the US filtered through.  Gold is still firmly entrenched in the down trend channel that has contained the price since the 1434 top and is approaching critical support in the 1272-1277 area.

To illustrate how critical this area is for gold, a break of this zone will suggest a return to 1180 in the short term and have potentially grave consequences for gold in the longer term, as it would go a long way to confirming our "bearish" Elliot Wave count with a downside target of 1000-1050.

However a bounce off this area and move higher, breaking out of the down trend channel, would suggest a "double bottom" at the 61.8% retracement level and set the market up for a strong rally back towards 1500.

The dollar has found support around 80 and the resolution of US Government difficulties can only be positive for the dollar.  Equities remain strong and a resumption of the rally in stocks would put more pressure on gold.

There is little in the way of data released today, so we may see quiet trading into the weekend, barring a break of 1272-1277.

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

After failing to break through the upper boundary of the down trend channel on Wednesday, gold sold off sharply yesterday, hitting a low of 1294 before recovering to close at 1305.  The release of the FOMC minutes was an anti-climax, with no discernible reaction from the gold market.

The ongoing Government shutdown and looming debt ceiling deadline should provide some support to gold, though this has yet to materialise which is worrying for the bulls.  There is a high likelihood that an agreement on these issues will see gold sell off sharply and this must be appreciated if taking a long position.

However the bulls will see some constructive action in the charts that suggests the worst of the downside may be over.  For now, gold remains within a range, with 1277 at the bottom and 1330 at the top.  A break out of this range should see a significant move develop.

Support can be found at 1300, 1292-1294, 1277 and 1272.  A break below 1272 would suggest a swift return to 1180.

Resistance can be found at 1307, 1314-1316, 1322, 1330, 1338-1342, 1353, 1375, 1400 and 1434.  A move above 1434 would be very bullish, suggesting a return to 1500 and beyond.

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

Gold continued its recent pattern of higher lows and higher highs yesterday, briefly breaking through the upper boundary of the down trend channel at one point, hitting a high of 1330 before backing off to close at 1320.

The US Government shutdown enters it's second week and the situation is becoming more urgent as time goes on, particularly with the "debt ceiling" looming.

After exhibiting weakness for most of the last week, equities, oil and the dollar are seeing a little bit of buying interest this morning, putting gold on the back foot, though with FOMC minutes released this evening, we may not see much action until then.

Support for gold comes in at 1315, 1305-1307, 1300, 1292, 1277 and 1272.  A break of 1272 would suggest a return to 1180 was on the cards in the short term.

Resistance is currently at 1322-1325, 1328-1330, 1338-1340, 1353, 1375, 1400 and 1434.  A break of 1434 would suggest a new bull leg was under way with targets above 1500.

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

The combination of falling equities, oil and dollar and the ongoing deadlock in Washington finally saw gold move higher yesterday, with the price hitting a high of 1328 and arriving at the upper boundary of the down trend channel.

A break of this channel would be bullish and suggest a move back to 1375 and 1400, though a resolution to the Government shutdown could see a sharp rally in equities and the dollar which would be bearish for gold in the short term.

The debt ceiling deadline is also now looming closer, which is another potentially bullish factor for gold, particularly if it becomes entangled with the Budget deadlock.

The Government shutdown has also resulted in a delay to much of the economic data from the US, meaning traders have less to guide them and the data that is released increases in importance.

Support can be found at 1320, 1306-1308, 1300-1302, 1292, 1277 and 1272.  A break of 1272 would see a swift return to 1180.

Resistance can be found at 1325-1328, 1338-1340, 1353, 1375, 1400 and 1434.  A break of 1434 would suggest a return to 1500 and perhaps beyond.

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

We made an interesting observation on Friday - with the release of the Non Farms Payroll (NFP) number cancelled due to the Government shutdown in the US, gold sold off sharply then rallied at 1.30pm as if the NFP number had been released anyway!

It is clear that trading algorithms had been set to "play" the NFP volatility and went off regardless of the fact that no number was even released.  This goes to show how dangerous it is to trade around significant news releases and that the trading immediately before and after the release can be disregarded entirely.

After the volatility surrounding the "phantom" NFP number, gold settled back into the pattern of the morning, drifting slowly lower.  This pattern has continued overnight and into this morning, with gold now trading at 1311, some $16 off Friday's high and near to support at 1305-1308.

Further support can be found at 1300, 1292, 1277 and 1272, with a break of 1272 suggesting a strong likelihood of a move back to 1180 in the short term.

Resistance can be found at 1316, 1322-1325, 1338-1340, 1353, 1375, 1400 and 1434.  A move above 1434 would suggest a return to 1500 in the short term.

Equities and oil remain under pressure due to the shutdown, with the dollar also weak and struggling to reclaim the 80 level.  This is the ideal environment for gold to rally, the fact that gold remains unloved and in an established down trend is worrying for the bulls.

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

The recent trading in gold has been choppy with a downward bias as events in Washington regarding the US Budget and the upcoming debt ceiling deadline unsettle markets.

Gold surged higher yesterday afternoon on the back of a weak ADP jobs report though found resistance at the 1322 level for the second day in a row - this area is now important resistance, with the market making repeated failed attempts to break 1320 last night and this morning.

US equities and the dollar sold off sharply yesterday which also benefited gold, however the response was rather muted considering the prevailing conditions that should see gold moving sharply higher.  This suggests to us that once the US equity markets and dollar recover, gold will fall sharply.

A test of 1272-1277 looks likely, particularly if the US government problems are resolved - a break of this key support level will likely see a swift return to 1180 as a minimum, with the possibility of much lower prices.  Support comes in at 1307, 1300-1302 and 1292 before this.

The key resistance level is 1320-1322, with 1338-1342, 1353, 1375, 1400 and 1434 above this.  A break of 1434 will suggest a return to 1500 and potentially much higher prices.

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

After hitting a high of 1337 overnight, gold sold off steadily all morning yesterday before crashing lower at the US open, slicing through all but one of the support levels we highlighted in yesterday's blog update with barely a pause for breath.

Gold hit a low of 1282, some $55 lower than the overnight high, before finally stabilising, though the chart damage is significant and the market is closing in on key support at 1272 this morning.

The dramatic sell off came amid weak equities and a tumbling dollar, usually supportive factors for gold, and the Government shut down is giving no support to gold at all.  As we pointed in our videos to subscribers earlier in the week, those commentators claiming the Federal Budget deadlock would be supportive to gold "just like in September 2011" are confusing correlation and causation - just because last time there was a Budget deadlock gold rose dramatically doesn't mean that the deadlock was the reason for the rise!

Equities are down sharply again this morning and the dollar is also weak, holding just above 80.  It is clear that the Budget debacle in the US is hurting the dollar and the reputation of the US in the process.

Oil is falling sharply along with gold and silver, $100 a barrel is the next target, whilst gold needs to hold 1272 to avoid a swift return to 1180.  We aren't banking on it.

Today's video for subscribers looks at yesterday's dramatic trading action in more detail and our strategy for our current (short) trade.

Gold was on the defensive during early trading yesterday, though received a boost from news that France is not planning to sell any gold reserves, after rumours circulated suggesting this was an option, sending the price temporarily up from 1322 to 1337.

This "knee jerk" rally did not last and traders saw an opportunity to sell into the price rise, with gold falling back to settle under 1330.  This morning, gold is slightly firmer on news of the Federal Government partial shutdown in the US and a weaker dollar.

Gold remains within a well established down trend and below both the 20 and 50 DMAs, with the 20 DMA having just made a bearish crossover with the 50 DMA. 

Resistance can be found at 1337, 1344, 1348-1353, 1375, 1400 and 1434, with support coming in at 1322, 1317, 1307, 1300, 1292 and 1272.  A break above 1434 will suggest a rise towards 1500 and a break below 1272 will suggest a swift return to 1180.

Equities remain in corrective mood, though the bull trend is firmly in place and intact, whilst oil continues to drop, hitting $101 a barrel yesterday.

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