Gold continued to decline from its broken neckline yesterday with investors exiting equities and running towards the Dollar for cover.  Gold continues to exercise its positive correlation with U.S. equities, and serves as a competent indicator for the S&P futures.

Despite yesterday's decline, losses were tempered as bulls came to the rescue at our critical 1st tier uptrend line.  The 1st tier uptrend line is important since it originates from 2008 lows and touches several lows along the way, including 11/13/08, 4/20/09, and 5/04/09.  Therefore, any contraction below our 1st tier uptrend line could result in a relatively quick retest of the highly psychological 900 level.

The current state of gold's technicals represents the fragility of the global market right now.  The S&P futures are flirting with the possibility of a large pullback, and gold could continue to lead the way as far as indicators are concerned.

Therefore, investors should keep a close eye on gold whether or not they are invested in the precious metal.  We maintain our near-term negative outlook on gold, which could turn into a medium-term outlook should the 1st tier uptrend line not hold.