Gold Breaks Down, Dollar Limp

Gold plunged through the 55-day and 100-day moving averages in a damaging day for the bulls. The US dollar was the worst performer once again but was able to hold some important levels. The Asia-Pacific calendar is quiet to wrap up the week.  

Gold fell more than $40 and closed near the lows at $1321 in a near-constant fall. It was the worst day for the precious metal since June 25. Technically, it may have been even worse. The first leg down came on the break of the 100-day moving average at $1356. The fall stalled at the 55-day moving average at $1326 and there was a small bounce but eventually it gave out.  

Even hints of hawkish rhetoric on Syria from the US and signs of sticking points in negotiations did little to support the precious metal. The next support line is the mid-August low of $1316, followed by the 50% retracement of the June-Aug rebound at $1306. Given how easily the moving averages gave out and the likelihood of a taper, it's difficult to be upbeat.

The entire gold move this week has come despite a weak dollar, which is another reason to worry. The dollar bulls had some momentary good news with the initial jobless claims report. Claims at 292K compared to 330K expected were the lowest since 2007 and the dollar jumped 20 pips. But there was a caveat in the report and two states weren't counted, leading to a quick reversal.

The dollar bears jumped on the turnaround, especially in cable and it broke through a sticky zone at 1.5830. Still, the dollar showed some decent signs, for instance cable could climb no higher than 1.5840 and eventually slipped back to 1.5807. EUR/USD was unable to break yesterday's high at 1.3325.

As the market begins to focus on the taper, there is a chance for a dollar bounce. Friday's retail sales report will also be an important factor.