Below is a graphic (all charts are from fxstreet.com) that compares the current pattern on gold (about July 2011 to current) to a 2007 pattern:
On both charts, I have suggested how the patterns might be similar by marking similar points, from 1 to 6. Based on this comparison, it appears that the gold price is searching for that point 6.
The bullish expectation is still very much justified. We would need a turnaround very soon though to continue the mega-bullish expectation. If we do not get the turnaround very soon, then price could go even lower than $1,500/ounce (oz).
The following graphic suggests that we could see a turnaround very soon. Below is the last part of the patterns presented in the above graphic (note that the current chart is weekly chart, while the 2007 is daily):
On both charts, I have suggested how the patterns might be similar by marking similar points, from 1 to 3. Based on this comparison, it appears that the gold price is searching for that point 3. The market, however, appears to have played a trick, which provides the possibility of an alternative comparison. The alternative comparison is indicated by points A to G on both charts. Notice that from point C to G, the chart appears to be rising on the 2007 chart, while falling on the current chart. This explains the reason for prices going lower than I expected.
Both alternatives suggest that the gold price is searching for that final point before starting a rally. However, what this comparison also suggests is that from a timing point of view, point 3 or point G could be in soon (as soon as this week). On the 2007 pattern, from point 1 to point 2 was about 8 days, whereas from point B to G was about 9 days. If we apply the same ratio to the current pattern, then point G could be in on day 50.62. Today is day 50 since point B, so we are there or almost there.
If we do not get the turnaround rally soon, it could mean that we will go much lower than current levels. For now, I believe that it is more likely that we will get the rally soon.