The gold market is still on a downward trend

The downward trend in gold is alive and well - but how low can it go? John C Burford uses his chart-trading methods to hunt out clues.

I last covered gold on 12 July when the market was staging a relief rally from the huge collapse it had suffered from April to June. In those few months it fell from $1,600 to under $1,200.

But after such a descent, a relief rally is normal (some call it a dead cat bounce). My best guess back then was for a rally above the $1,300 area in an A-B-C pattern, where the C wave would end in the region of the down-sloping trendline. This was the chart I showed then:

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(Contracts of 100 troy ounces)Row 0 - Cell 1 Row 0 - Cell 2 Row 0 - Cell 3 Open interest: 434,750
Commitments
161,197127,00625,291210,233244,929396,721397,22638,02937,524
Changes from 07/16/13 (Change in open interest: -5,533)
4,626-6,1032,220-12,513-2,424-5,667-6,307134774
Percent of open in terest for each category of traders
37.129.25.848.456.391.391.48.78.6
Number of traders in each category (Total traders: 297)
116102785459214199Row 8 - Cell 7 Row 8 - Cell 8

John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.