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(Kitco News) - Tues March 20—June Comex gold futures are under pressure midday Tuesday, but for now are holding above key Fibonacci retracement support around $1,630 per ounce. That is the key level that must hold near term to prevent additional downside losses for the yellow metal.

In recent weeks, the bears have established a series of lower lows and lower highs on the daily chart, off the late February high—and a minor daily downtrend is intact. However, 61.8% of the rally off the late December low comes in around $1,630.

That is the key support level to watch near term. If sustained declines below that level were to occur it would open the door for a retest of the late December low, according to traditional Fibonacci retracement theory.

In the bears favor, several negative developments have unfolded on the daily chart in recent sessions. First, the market has closed under the 200-day moving average, currently at $1,685.70.  Second, the 20-day moving average has turned below the 40-day in a classic bearish moving average crossover—which is traditionally interpreted as a sell signal.

Terry Gabriel, technical analyst at Ideaglobal in New York, saw bearish chart developments. "We've broken and closed below the 200-day moving average. Weekly stochastics appear to be turning down," he said.

Gabriel pointed to last week's low at $1,637 and called that key near term technical chart support for the market. "A break below there will point to a sustained move down," he warned.

Shifting out to the weekly chart for gold futures, Gabriel drew a support line off the January 2009 low, which currently comes in around $1,540, he said. "I expect over the next two to four weeks, we will be falling toward that support line," Gabriel added.

That weekly support line, which is rising about $5 per week, also roughly coincides with major daily chart support at the September 2011 low at $1,544 and the December 2011 at $1,528. "That area is my target over the next month," Gabriel explained.

Bottom line? "Momentum appears negative on a weekly and monthly basis. I expect a deeper decline over the next month. On a bounce I would look to be a seller. The 200-day moving average should cap near term rallies," Gabriel concluded.

May silver futures have also established a recent daily downtrend. Key near term support lies at $31.62. If that floor cracks, it will open the door to a fresh downswing in price. A bearish head and shoulders top pattern is seen on the daily silver chart, with the head at the February 29 high. That formation suggests a medium term top in the silver market.

On the downside, the next key support level comes in around $30.60, or a 61.8% Fibonnaci retracement off the late December-late February rally.

By Kitco News

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