The 1999-2011 gold bull market was primarily predicated on two main tenets:

  • A weakening US dollar and the gradual demise of the dollar as the World's reserve currency
  • Loose monetary policy and low interest rates (even negative real interest rates) for as far as the eye could see

This morning gold is falling hard following another monthly non-farm payrolls report which indicated things are actually looking pretty good right now in the US economy. This report prompted Fed 'waterboy' Jon Hilsenrath to write the following:

"The US jobless rate, which falls to 5.9% in September, was already where Fed officials projected last month it would be by year-end. Moreover payroll employment growth is robust, averaging more than 200k per month. That means early interest rate increases next year — though not the Fed’s expected path before today — remain on the table. In addition, officials will need to make a tough decision at their policy meeting later this month about whether to alter their guidance about the interest-rate outlook, or wait until they update their economic forecasts in December before changing the guidance."

The updated prognosis of rate hikes sooner rather than later sent the US dollar soaring and gold reeling:

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With sentiment on gold through the basement floor the last level of defense is the double-bottom at $1,180:


Should the $1,180 support level get breached, Goldman's $1,050 target becomes a very realistic downside price objective:


Support/resistance from 2008-2010 in the $1,000-$1,050 area could become a strong price magnet should $1,180 support get breached

While the technical picture is bordering on dire for gold, one must wonder if articles such as the one below appearing in USA Today are akin to the magazine cover indicator for the stock market.....