These are parlous times. War or near-war in Eastern Europe, Syria and Gaza. A widening epidemic of a deadly disease in Africa that is creeping into Europe and North America. And for those of us who watch the markets for a living, the ultimate crisis: the CME Globex exchange was down for a good part of Sunday night.

But despite all that trouble and strife, gold – the ultimate safe haven when all else is failing – is quietly meandering lower.

Last week for example, we got the regular Friday morning propaganda from the Ukraine: Russia had moved trucks loaded with humanitarian relief supplies across the border and this constituted an invasion! More War!

The headlines would normally send gold prices screaming higher. Instead they barely slowed the inch-by-inch decline that had been going on all week.

As we pointed out last week for the equity market war talk is becoming just background noise. Similarly, gold won’t pay any attention until the cannons actually roar for real.

What’s Ahead This Week

If war won’t move gold prices, maybe technical analysis will.

Gold is moving closer to the support area of a triangle pattern (see chart below) and the triangle is closing. That often means a breakout is coming.
We may get a little bounce from the bottom of the pattern, but the bounces have been getting weaker and we don’t see any bounce carrying beyond $1295 – $1300, reference the futures. Unless the price breaks decisively above that level, the long-term downtrend remains intact.

The most important support level this week is $1265. If the futures break below that area they are likely to move lower to $1241.90 – the June low. And if they break $1240, look for a further decline to the $1200 – $1195 area, the long-term support.

Two Things To Watch For

This is the end of the month, and there is always a little window-dressing going on around the last trading day of the month.

But this month might be worse than usual because of the Labor Day holiday on Monday.  Many traders will take Friday off, the volume may be down, and the market may be scrambling up and down on thin trading.

And while war is being discounted now, that attitude will change quickly if the shooting actually starts. In that case, a panic buying situation may develop and run the price above any expected level.

But absent a shooting war, we expect the decline to continue. Traders should focus on finding good short entries.

PollyAug25.png

Gold futures at Aug. 22, 2014. Weekly bars.

= = =
See Nat’s complete analysis of the Gold market each week at www.naturus.com/gold. It’s free.