Submitted by Stewart Thomson:
The round number support of $1700 in gold failed Tuesday. Technical traders often place a lot of stop-losses and short sale orders just below such uptrend lines, and that can bring substantial volatility to the market. While stronger hands in the gold community are buyers of such breakdowns, it is often not enough to overwhelm the technical sellers, many of whom are leveraged. Also, while the larger commercial traders tend to be buyers of trend line breaks, they often place less bids than the amount of gold offered by traders who are panicking or facing margin calls.
Their reluctance to bid for all the gold that is offered can produce even lower prices. Many central banks have active gold buy programs that provide support to the market, and it often comes just when it seems that gold will never stop declining. I believe that gold is coiling here, and it will soon surge through $1800.