It's hard to be upbeat about gold these days, but technical analysts are keeping their faith in the long-term bull run -- just barely.

As the precious metal fell by a record over $120 an ounce on Friday and Monday, peak to trough, gold selling snowballed as several important technical support levels were breached. What began in early September as a correction after several months of accelerating gains has threatened to become a rout.

But the most critical price points needed to maintain the post-2008 rally at around $1,500 an ounce have held firm for now, according to analysts who study candlestick charts and historical trends to predict prices.

Monday's low at $1,534.49 was just above the 200-day moving average at $1,527, the first of three relatively clustered support levels that are either going to provide good reentry levels, or, if they all crumble, perhaps signal that this was more than a short-term correction.

The trendline connecting major lows at $680.80 on Oct 24, 2008, and $1,156.90 on July 28, 2010 lies around $1,472.60 and rises about $2 per day. Right below that at $1,451.43 is the 38.2 percent Fibonacci retracement of the 2008-2011 rally, which is an important technical objective for followers of Elliott Wave Theory and others.

As long as that pull back is orderly, one would have to give bulls the benefit of the doubt in the long-term timeframe, says Adam Sarhan, CEO of New York-based Sarhan Capital. However, the bears remain in control of this movement.

At its low of $1,534.49 early Monday, gold was down 20 percent from the record high at $1,920.30 set on September 6. While 20 percent is the conventional bear-market threshold for stock market technicians, it is less meaningful for gold because the market is so volatile and sometimes illiquid.

As long as we are not settling below $1,500, I'm very, very comfortable in my bullish bias, said Christopher Henwood, a commodities market analyst for Reuters Insider.

CORRECTIVE MEASURES

By Monday evening, gold had pared its losses to close 16 percent below its record. Such a loss is in keeping with corrections seen since the start of gold's decade-long bull market, according to Sarhan, who said the average monthly pullback for gold since the up trend started is 15.6 percent.

Gold closed at $1,620.09 per ounce on Monday, down from $1,655.29 on Friday. That is still a quintupling of prices since gold broke above $300 per ounce in 2002.

This is simply in line with the normal average decline we've seen since 2002 in gold's very strong bull market, Sarhan said.

Indeed, since gold recovered from a 33 percent July-October 2008 retreat during the financial crisis, gold's largest declines were 14 percent over 42 days in February-April 2009 and from December 4, 2009 to February 5 2010 with 15.2 percent shed.

Normally in bull markets as established in gold, you see several pullbacks which shake out the weaker hands and also give the market and bulls a chance to digest the recent move, said Sarhan.

Since the long capitulation started on Thursday, gold fell 8.2 percent, the deepest three-day slide since late October 2008. It gained momentum upon breaking below price levels identified as being important -- usually previous highs and lows or trendlines drawn to extend through them.

This forced investors with long positions tied to gold going up to liquidate en masse to cut losses or lock in profits before they evaporated.

Even if they are selling it here, chances are they've got some good money in this position, if they held it for a long time, Henwood said.

On Monday spot gold moved below the 100-day moving average -- widely watched as an important trend indicator by traders -- which was the catalyst for much of the leg down on Monday.

But that move started in Asia trade, when markets were still relatively thin, and subject to bigger swings, without London and New York traders fully involved.

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