Gold Technicals – Heading towards short-term consolidation floor

Gold prices haven’t moved significantly since last Wednesday, where prices rallied strongly following Act II of Bernanke’s QE shocker. Previously in Act I, Bernanke hinted at the possibility of tapering QE3 purchases by year end, and stopping QE3 entirely in 2014, sending gold prices sinking. However, in last week’s Act II, Bernanke reiterated that stimulus will continue for the foreseeable future, reigniting demand for Gold as traders seek long-term inflation protection by stocking up the yellow metal. Since then, price has been trading mostly between 1,280 – 1,295  as we approach Bernanke’s testimony in both House and Senate which is happening today and tomorrow respectively.

Hourly Chart

From a technical perspective, price is currently finding support via the rising trendline which connects the 3 recent swing lows. Stochastic readings suggest that we’re in the midst of a bear cycle which should ideally hit 1,280 consolidation floor, and with the fact that readings is still a distance before hitting Oversold, it is possible that we could see price potentially breaking this ascending trendline which may increase bearish acceleration temporarily.

Weekly Chart

Long term chart shows gold prices pushing towards the blue Channel Top after rebounding from the Channel Bottom 3 weeks ago. Last week’s marubozu which is preceded by the spinning top candlestick suggest that a bullish reversal pattern is currently in play. This is in line with Stochastic readings that are pointing higher and peeking above the 20.0 line, suggesting that a move towards 1,300 – 1,330 resistance and potentially towards Channel Bottom (purple color) may be possible.

There are good signs that this rally may do just that, with speculative buying starting to pick up. However, physical purchase of gold has dipped significantly due to latest round of restrictions enacted by India in response to the weakening Rupee. As such, there is a possibility that current bullish cycle may be cut short, which is not all too surprising considering that recent bullish cycles in 2013 has all failed miserably, with Stoch readings not even able to hit 50.0. Looking at past price action, we see recoveries failing to move prices higher, but merely consolidating beneath the previous consolidation floor. Perhaps the same could happen again this time round, given the problems faced from the fundamental front.

More Links:
USD/SGD – Falling Exports Driving Weaker SGD
GBP/USD – Continues to Sit on 1.51
EUR/USD – Pushes Through Resistance at 1.31

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