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Here is what top Citi analyst Fitzpatrick had to say in his latest report, along with some powerful charts:  Gold saw three weeks of indecision just below the important double bottom neckline at $1,790.  These indecision weeks were followed by a down week last week suggesting short term losses now.  Weekly momentum is also stretched and crossing back down. 


A correction down to $1,661-$1,669 could be the danger in the near term before renewed gains later.  This is where the 55 week moving average and 50% retracement of the last rally converge.  Short term support is at $1,736 and it should be noted that the 200 day moving average comes in at $1,660, i.e. it converges with the 55 week moving average so should provide good support if/when tested.




Brent shows the opposite price action to Gold on the weekly candles (left side of the chart below).  We had two weeks of indecision and then a rally last week suggesting higher levels can be seen.  The daily chart on the right shows the double bottom which has a target of just under $120.




The chart (below) is the ratio of London Metals Exchange Index versus Brent where a move down reflects the outperformance of Brent.  The rally on the ratio from the Aug low (23.5%) was very similar to that seen between April and June (24%).  The high in Sept was also the 76.4% retracement of the last move down.




We then formed a short term double top.  That double top target has already been met, however, given the similarity between now and earlier this year and the hold of the 76.4% Fibonacci retracement level, we could still be in danger of seeing lower levels, possibly as far as the trend lows again. 


A move to 3,328 on the London Metals Exchange Index (the next decent support level) and a rally to $120 on Brent (double bottom target) would put this ratio at 27.73 which is 7.5% below current levels.


The end of the report may be a little complicated for some readers.  What Fitzpatrick is saying here is that gold should underperform crude oil for a short period of time.  He believes that gold may correct a bit further, but crude oil will hold up well, and possibly continue to advance to the $120 level on the Brent contract.


I would just add that although Fitzpatrick believes we could see just a bit more weakness in gold, he is saying this is healthy action, and the medium-to-longer-term uptrend is still very much intact, with much higher price targets for gold.  For those who are following silver, until news hits that will move that market, it will trend with gold.


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The interviews with Jean-Marie Eveillard, Bill Fleckenstein, Art Cashin (UBS $612 billion), Jeffrey Saut (R.J. $360 billion), John Embry and Gerald Celente are available now.  Also, be sure to listen to other recent KWN interviews which included, Rick Santelli, Michael Pento, Don Coxe, Pierre Lassonde, and Rick Rule by CLICKING HERE.


Eric King

KingWorldNews.com

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