If you've been betting on gold this year, watching it fall day after day – including a few spectacular crashes, like the one we've seen over the past few trading sessions – has probably not been fun.
As the daily candlestick chart at right shows, the shiny yellow metal hasn't spent many days in the green.
Today, the price of an ounce of gold dropped below $1200 for the first time since August 2010, hitting a low of $1196.10 this afternoon before bouncing back to current levels just above $1200.
BofA Merrill Lynch technical strategist MacNeil Curry argues today in a note to clients that "further gold downside [is] limited."
"While Gold has been on a relentless downtrend, the weekly ADX (a measure of trend strength, not direction – see chart 1 for additional info) says further weakness is limited. Indeed, previous ADX readings of 50 have resulted in reversals of between 35% and 36% of the flat price," writes Curry. "GOLD BEARS BEWARE. For now, the downtrend remains for 1212/1200, but this decline is in its final stages. Bulls need a move above 1270 to indicate a base and turn."
The chart below shows the ADX, or "Average Directional Index," that Curry references.
The second chart shows the potential support levels flagged by Curry.
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