“The recent drop in the price of gold had all the characteristics of a central bank intervention with the purpose of price suppression since it consisted of a one shot sale of slightly over 30 tons. No for profit seller would have carried out the operation in this manner. There are two other possibilities: the seller is an idiot or the seller needed a few hundred million dollars in a hurry from one day to the next. I think that it is reasonable to exclude both.

“Which goes to show that by selling approximately 1% of the yearly turn over in gold, price suppression works just fine and presumably central banks will repeat this operation a few times per year.

“Since central banks cannot allow confidence in fiat money to wane, one can only imagine that the price suppression scheme will go on since central banks hold enough physical metal to ensure the success of their strategy.

“Of course the price of gold will continue to go up at around 10% per annum which is acceptable to central banks, but not much more. For how long will this intervention be required? Until interest rates rise as they inevitably will in three to five years down the road, at which time the price of precious metals will come down by market forces and intervention will no longer be necessary.

"Does technical analysis make any sense in this context?

Eoin Treacy's view Thank you for this informative email. This article from last Thursday's Mineweb gives some additional detail of the 1000 lot sale. I have seen a number of rationalisations of the price action since then. Government intervention is one potential reason for the decline. HFT trading is another. An attempt to influence markets is another. Following any such bolt from the blue, the question arises as to whether price analysis works.

Following the flash crash in May 2010 the same question was asked and I believe the answer is the same. The downward dynamic, from an area of previous resistance, has clearly had an effect on sentiment. We may cast around for the reason but the effect is unquestionable. Near-term sentiment is now more uncertain. The response of at least some investors will be to wait and see what happens, sapping potential demand. A clear upward dynamic will be required to suggest a return to demand dominance in the short-term.

Over the medium-term, I would be a lot more comfortable if gold found support above or in the region of the MA, currently near $1650. However, a sustained move below the December low near $1550 would be required to suggest a deeper correction is unfolding.

Gold has been a wonderful investment over the last decade, churning out positive returns for 10 consecutive years. Despite last week's pullback we believe there is little technical evidence that the secular advance is over. However, I believe it would be dangerous to confidently predict gains of 10% per annum. We simply do not know if that will be the case. At The Chart Seminar, we attempt to foster the humility to allow the market to unfold as it will. It doesn't care what we wish for, or want. We can only monitor the price action and act accordingly.