"Gold is having a hard time coping with Central banks sales or lending or whatever the case. Technically it is quickly approaching its 200 ma and counting. What should the long term investors analyze in order to know when to exit the position? If and when gold breaches the 200 ma (maybe today), is there signals to be followed that can give us a view about whether we enter a bear market? Thank you very much for your thoughts and coaching in these difficult markets."

David Fuller's view Thank you for your email which is certain to be of interest to other long-term investors.

In breaking down from its triangular trading range this week and also falling below the 200-day MA yesterday evening, gold (historic, weekly 10-yr, weekly 5-yr & daily) has confirmed the Type-1 (spike peak with right-hand extension top formation) as detailed at The Chart Seminar.

While Type-1 upward accelerations are almost invariably followed by sharp corrections, gold recovered approximately three-quarters of its decline from the subsequent September low. That required some support building and higher reaction lows to encourage demand.

While there was always a risk of contagion selling as other assets weakened, the triangular shape in recent months meant that theoretically, gold could have broken out of that pattern in either direction. Many of us, including Fullermoney, were inclined to give the upside the benefit of the doubt while reaction lows were still rising and gold was above its advancing 200-day MA.

When gold suddenly broke its rising lows on Monday with a downward dynamic, every technical trader knew that meant trouble and there has been a scramble for the exits by leveraged participants.

For approximately similar conditions we have the example of 2008 when gold fell by about a third. A decline of that magnitude from the September high of $1921 would be $640, taking the price back to $1381.

I hasten to add that this is a comparison, not a forecast, but other people will make similar calculations. Markets can undershoot or overshoot expectations. All we really know is that at today's low or $1561, gold has seen over two-thirds of a potential 33 percent correction.

Given the suddenness of gold's downward break this week, I assume that there are unleveraged investors in bullion funds who would like to sell into a rally. While that may prevent a significant rebound from occurring at this time, should a rally of $50 or more from today's levels occur in the next few days, it would provide an opportunity to lighten, if that is what you wish to do.

Meanwhile, gold has developed a short-term oversold condition having retraced the upward acceleration towards its August high. It has also fallen back to its September reaction low and prior trading ranges established during the year's earlier advance. These factors should slow gold's descent relative to what we have seen earlier this week.

I suspect that many of the long-term investors holding bullion, who did not lighten positions during the upward acceleration in August, will prefer to ride out this correction, subject to how it is performing in their local currency.