![\"Time](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/06\/200613_PC_leong.jpg\" "\\"Time")
<\/a>As many of you know, I\u2019m not keen on the near-term prospects for gold<\/a> at this juncture. The metal, while still viewed as a safe haven for some, is no longer on my buy list.<\/p>\nYes, central banks are buying gold, but so what? The supply of the yellow ore continues to be ample, and demand really doesn\u2019t appear to be doing anything.<\/p>\n
In mid-April, I was bearish on gold when it traded at around $1,480\u2013$1,500 an ounce. (Read \u201cIs Gold\u2019s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be<\/a>.\u201d) And here we are two months later and the spot price is down 6.5%, while the S&P 500 has gone up about 3.7% during the same time.<\/p>\n Now I\u2019m not saying that I would never be a buyer; I just wouldn\u2019t be buying at this time, due to tough resistance and selling on upside moves, based on my technical analysis.<\/p>\n Take a look at the chart below. The first thing you\u2019ll notice is the presence of a firm bearish \u201cdeath cross\u201d since late February, when the 50-day moving average (as shown by the blue line) crossed below the 200-day moving average (as reflected by the red line). Since the initial move, the gap between the two moving averages has widened and gold prices are trending lower.<\/p>\n Chart courtesy of www.StockCharts.com<\/i><\/p>\n The next developments you will notice on the chart above are the two successive descending triangles characterized by lower subsequent highs.<\/p>\n The first descending triangle materialized between early February and early April, prior to gold tanking on the chart, falling below $1,350. We are now in the second descending triangle with support around $1,350. Failure to rally and hold could result in another sell-off.<\/p>\n Again, take a look at the Gold Bugs Index, comprising a basket of unhedged gold stocks; this is why this index is such a good indicator of the movement of prices due to the lack of hedging.<\/p>\n Chart courtesy of www.StockCharts.com<\/i><\/p>\n The picture for the yellow metal doesn\u2019t look favorable. In April, Goldman Sachs advised shorting the metal and mentioned the $1,200 level. (Source: Cosgrave, J., \u201cThe Scary Number for Gold Investors: $1200,\u201d CNBC, April 15, 2013, last accessed June 19, 2013.)<\/p>\n Gold at $1,200 is realistic but, of course, if inflation begins to creep higher, we could see a rally. At this stage, inflation is benign and a non-issue.<\/p>\n There is clearly more downside risk. Gold could rally back above $1,400, but I doubt it would hold. I would look at a rally as an opportunity to sell.<\/p>\n![\"Gold](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/06\/Gold-Chart.jpg\" "\\"Gold")
<\/a><\/p>\n![\"Gold](\"http:\/\/www.profitconfidential.com\/wp-content\/uploads\/2013\/06\/Gold-Bugs-Index-Chart.jpg\" "\\"Gold")
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