GOLD REPORT-DEC 2014: Umesh Shanmugam

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The technical structure of the gold chart also isn’t pretty. Despite last Monday’s huge upside reversal the daily chart is still exhibiting a bear flag pattern as price remains below a declining 50-day simple moving average and has consistently demonstrated an inability to maintain rallies above the $1200 level:

Gold_Daily_12.6.2014

A couple of other headwinds face gold as 2014 winds to a close: bearish seasonality (since 1980 gold has declined an average of more than 50 basis points during December) and the tendency of investors and portfolio managers to sell assets which have performed poorly both for tax purposes and for year end window dressing.

All of this adds up to a strong likelihood that gold will endure one more flush to the downside before we welcome in 2015. From a technical standpoint a retest of the $1130-$1150 support zone seems quite reasonable, however, a breach of $1130 would put the Goldman Sachs $1050 target into focus…and my target of $900…

-Umesh Shanmugam(PURELY MY VIEW