Hello James,
This is with reference to your comment on the post of “Harmonics on Gold”.
I thought, it would be better explained with some analysis and charts.
First of all, the strong moves recently in Gold certainly have been due to fundamental factors.
The financial situation globally had a strong effect on the Gold prices, but in answer to your question, the technicals still work.
Technical analysis indicates the situation as of now, in which all the current factors are priced in…the fundamentals, the rumors, the news…everything.
While this does not undermine the importance of the fundamental factors, one must remember one thing about technical analysis.
Whatever may be the reason for the price movement, the technical levels of support/resistance will always hold true

With regards to your second comment, about rumors of Gold reaching lows of 650-630…well…as I always say…we are traders and not astrologers.
We should follow price and our trades must be based on our tools in such a way, that we take profits from any price movement…up or down.

Let’s implement this procedure, so you get a better idea of what I am talking about.
We will analyze the Gold prices, based on a top-down approach.

Looking at the monthly chart, we can see that price is in a down retracement, after the huge up move.
We should obviously look for levels of support for this down move, and we use 2 basic and simple tools for that.
We plot the Fib retracements from the swing low to the swing high, and we can see that right now, price has found support on the 38.2 Fib retracement.
Secondly, if we plot support trend lines on all the higher lows, we can observe another support level at a trend line.
Let’s follow the “If-then” principle.
If this support holds, then we could see some up moves from here.
But if it does not, then the next lower target would be the lower trend line.

So, we have one part of our plan in place. If price breaks the support level, we have a fair estimate of the next down target…which is close to the rumored 650. -J

Now let’s go the weekly chart.

Currently the bearish trend seems to be in place, since price has been forming lower highs and lower lows.
Till the time price does not break the last high, we must remain biased towards the down trend, which supports our longer term views.

Now let’s have a look at the daily chart purely from a technical point of view.
Looking at the previously mentioned down trend of lower highs and lower lows, I want to demonstrate the power of the Fib ratios and the Harmonic patterns.
Situation.1 -

We had a bearish Gartley pattern which formed at the precise fib levels. The price target of this pattern was also fulfilled quite accurately.

Situation.2 -
Bullish Divergence.

The previous Gartley pattern completed with a bullish divergence, and we calculate the price targets of a divergence by Fib ratios again.
As we can see, price achieved the 161.8 fib projection very accurately and got rejected for further down moves.

Situation.3
Bullish 123 pattern.

As of now, price seems to have a found support on a 78.6 fib retracement and formed a bullish 123 pattern.
This would be an indication of a bullish move to the upside.
But a safe entry into a 123 pattern is when price breaks the high of ‘2’.

Hence we designate this current area as a No-trade zone.
Our trading plan should be -
Long entry on the break of the high of ‘2’.
Short entry on the break of the low of ‘1’

In all the 3 situations, did it really matter what moved the price?
The basic fact is that price does respect certain levels of support/resistance, and knowing this fact can give you an edge.
As traders, our job is to follow price and then manage the trade as per proper money management rules.

Sunil.