Wednesday October 20, 2010 - 02:02:19 GMT
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Gold Closes Lower after China Rate Hike
December Gold sold off on Tuesday after China‚Äôs central
bank raised interest rates. The move by China surprised traders who began
selling riskier currencies and commodities.
The People‚Äôs Bank of China raised its benchmark one-year
lending and deposit rate by 25 basis points effective from October 20, the
first increase in nearly three years. The move was most likely tied to pressure
from the U.S.
to increase the value of the Yuan. Others believe it was an effort to prevent
the economy from overheating. The action by China triggered a rally in the U.S.
Dollar, thereby weakening demand for gold and silver.
The current break in the gold market is the largest in terms
of price and time on the daily chart in a few months. This could be an
indication that further downside movement is coming.
The current main bottom on the daily swing chart is
$1325.60. A trade through this price will turn the main trend down.
Based on the current closing price reversal formation, the first
down side target is the 50% level at $1313.00, followed by the Fibonacci level
at $1295.30. On Wednesday, an uptrending Gann angle comes in at $1293.00. This
makes $1295.30 to $1293.00 an important support cluster.
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