David Fuller's view The recent technical deterioration for gold (weekly & daily) and its high-beta proxy silver (weekly & daily) commenced when the yellow metal looked at its November high near $1800, blinked and fell back with a large downward dynamic. Today's decline is challenging the 200-day moving average and silver has breached that trend mean.

Both gold and silver have gone off piste, in terms of their prior trend consistency, as I have mentioned before, commencing with the accelerated (Type-1 as taught at The Chart Seminar) peaks in April and August 2011, respectively. Consequently, I make no apologies for saying in this review that the post-peak analytical challenge remains considerably more difficult. This reflects the tug of war between buyers and sellers, and the inevitable uncertainty that it produces. At such times one's analysis will not be helped by faith-based bold forecasts. Most of the forecasts that I have heard or read from other commentators are predicting anything from $2200 to $1200 this year.

No one knows but what we can say is that having failed near $1800, disappointing the bulls, gold is now in search of its next floor. Whether it finds it above or below the September and December lows in the $1533 to $1522 region will have short to medium-term implications. A lower low which is sustained for more than a few days would suggest another downward step to follow. Conversely, a higher low, confirmed by a significant bounce, would indicate support building prior to another test of $1800, a level that must be crossed and gains retained before we will have tangible evidence that a medium-term demand-dominated environment really has returned.

Fundamentally, one can certainly make a good case that with all the money printing and low real interest rates, gold's secular bull market should remain intact. In other words, there is a lot more fiat currency sloshing around which could be channelled into gold, than bullion available to accommodate that demand at anything close to current price levels.

Personally, I do not doubt this but the question is when? For perspective, the last major correction for gold, prior to the August/September 2011 peak, occurred following the 2008 acceleration above $1000. Shown on a semi-log scale chart, this is very similar in overextension to last year's peak. The subsequent correction faced the full force of 2008's asset liquidation. We are unlikely to experience a similar route anytime soon, in my opinion, having gone through last year's 2H smaller convulsions. Nevertheless, the gold price is considerably higher today than in 2008 and the consolidation which followed lasted eighteen months before the overall uptrend resumed. Since we have yet to complete seven months in the present correction, long-term holders of gold bullion may have to remain patient. As in 2008-2009, gold will have to establish another progression of higher reaction lows before we can conclude that demand has regained the upper hand.