Gold Technicals – Confirmation Of 1,315 Break Needed For Further Bullish Push

Gold prices fell during European hours yesterday, dipping below 1,300 round figure briefly but managed to stay mostly afloat the level. However, unlike Tuesday’s price action which followed the script given by risk-trends, yesterday’s price action was surely moving on its own accord as the slide occurred when European stocks were less than outright bullish. Certainly major indexes such as DAX and FTSE 100 did closed out higher, but a close examination of price action shows that risk-trends were actually bearish after the first couple hours of trading.

Hence, we should have seen Gold prices moving higher and not lower if it is indeed sensitive to risk trends, and the failure to do so is a confirmation of what we’ve been seeing previously – strong bullish sentiment (most likely led by institutional speculators) and strong bearish fundamental factors attracting selling activities whenever we move higher significantly. Price actions seem to agree as well, moving at a consistent gradient higher in a step-like predictable fashion – totally undeterred by the ebbs and flows or even volatility of the broad market.

If the above trend continues, then the likelihood of prices trading back below 1,315 significant resistance becomes higher as we are once again trading around the Channel Top with Stochastic indicator favoring a bearish cycle moving forward. However, it is entirely possible that bulls may be successful in defending this level as it is clear that they have been having the upper hand thus far (which explains the bullish trend in the past week). As 1,315 is a key resistance level, the incentive for bulls to hold onto their gains becomes higher due to the breakout potential. This implies that if 1,315 is successfully held, the likelihood of prices accelerating up becomes higher.

Unfortunately, the same could be said about bearish potential as well. If 1,315 collapse meekly without putting up a fight, this could be a sign that bulls have reached their desired bullish target and hence has no more reason to hold onto their positions. As such, sharp selling behaviors may occur and it may not be surprising to see current uptrend capitulating.

On the long-term fundamental side of things, it should be noted that a large part of current bullish gains can be attributed to the more dovish than expected FOMC minutes which was released during New York afternoon. Granted, prices was already holding nicely on 1,300, and momentum suggest that prices would have eventually rebounded up higher to where we are currently eventually even without the dovish news. That being said, it bears mentioning that such short-term development should have zero bearing on the future where QE will definitely end and interest rates rising higher. As such, long-term direction of gold remain bearish, and the heydays of 1,800+ USD per ounce may be long gone unless we see a significant meltdown in Stocks similar to 2007.

More Links:
EUR/USD – Steady At 1.38 As Markets Await Fed Minutes
USD/JPY – Yen Takes Breather After Huge Gains
AUD/USD – Aussie At Five Month Highs After Strong Data

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