The gold correction I wrote about 8 Sept is now underway but the yellow metal can fall another $149 before long-term investors need to worry. The most important question is: Where will gold find support?
Some basic analysis gives us two scenarios. The first, the bullish scenario, is that gold finds support at the at the lower trend channel at around $1,700. This would see gold remain within its new steeper up-channel that it began back in March.
The second scenario, the more bearish one, would see gold fall all the way back to its 150-day moving average – which has acted as long-term support. Under this scenario gold could fall $149 from here before I would be worried and provided the $1,590 area was not violated to the downside this would set the scene for a period of consolidation followed by the next leg of the bull market.
The fundamentals that are driving gold have not changed and I believe that this is just a normal healthy correction within the context of an ongoing bull market.