Once gold broke its topside resistance in early February of this year, the 400 EMA (on a daily basis) has provided very strong support. In June, prices tagged this level and price began to rally in earnest. We have again tagged this level last Friday and the $1250 area is now showing very strong support and physical buying interest. For time being, we have to remain bullish as long as the 400 EMA level continues to hold on a daily closing basis.
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While gold is still holding above its 400EMA, so far each rally is being sold down aggressively. In gold bull markets, once prices have come down hard and quick, there is normally a snap back rally of sorts. Since gold reached $1241, we have only rallied up to $1276 which is acting as very stiff resistance so far. Should prices continue to consolidate between $1250-$1260 without a decisive breakout over $1275, then the possibility exists for a continued drop below $1240 in November.