I’ve been writing for a while now that I think that gold is going to break wide open sometime in the next 6 months (5 left) and that as a result we will see a material sell off and the the monthly chart (on which this view is based) shows that  Gold is currently walking its way out of its big pennant formation and as such breaking down through multiyear support.

Indeed the guys at our favourite blog on the planet “Global Macro Monitor” said in a post this morning

Gold has begun the year thrashing around in its flag chart pattern and off about 1/2 percent YTD.   Along with Apple,  it has been our printing press over the past five years.   Both currently trade like dog dirt.

Yesterday’s low of 1625 is a must hold and will determine the directional move over the next few weeks, in our opinion.

Obviously we have only had 4 trading days so far and January has only just begun, but this price action and the thoughts of the guys at MacroMon is instructive given that in December Gold only just managed to hold this big uptrend and the bottom of the pennant or wedge that it has formed since the highs of last year.

But as you can see in the daily chart below Gold has been in a down trend since the highs last year in October and the low on Friday night was right on the bottom of the down trend channel.

This channel is something that I wasn’t watching recently otherwise I would not have written that a break of $1635 would get  me short – rather as a respecter of trendlines it would have been the zone to be looking for a short term bounce, at least on the dailies anyway. Support today is $1620 and is slipping at a rate of around $1.50 per day.

What does all this mean then?

It is a question of time frames.

On the dailies I am going to respect the levels around this down trend channel and as such we could see a small rally  back towards the $1670′s possibly higher.

On the monthly charts I am a Gold bear and I strongly believe that even if it is not this month Gold is going to head lower in the months ahead. Its a slow melt rather than a meltdown but a melt nonetheless.

My targets are $1521 and oz and then $1394 as a simple long term retracement to the 38.2% fibonacci support – then we will see what happens.