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Back in September we warned of the risk for a near-term correction higher to test the 52-week moving average and indeed the following
weeks saw gold prices probe & fail to break above this threshold before turning over sharply. The subsequent decline is now testing a key
support zone heading into the close of the year at 1044/53. This region is defined by the 61.8% extension off the 2012 high, the 2010 low
and basic parallel support extending off the 2014 lows.
Since the late-2011 record high, gold prices have tended to make the yearly high in price within the first quarter of the year. Note that an
outside weekly-reversal candle took shape on the rebound off this key support with building divergence on the daily & weekly charts
suggesting that the short-side remains vulnerable near-term heading into the start of the year. Interim resistance stands at the July lowweek close at 1098 backed by the sliding parallel extending off the October high and the 1151/55 pivot region. A breach above this level
invalidates the broader short bias with such a scenario risking a rally back towards median-line resistance near 1200. Bottom line: well be
looking for a push higher in early 1Q for more favorable short entries with a break of the low targeting support objectives 1005, the
sliding parallel extending off the 2013 low and confluence Fibonacci support at 975/80.
Written by Ilya Spivak and Michael Boutros, Currency Strategists for DailyFX.com
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