Gold Technicals – Clawing Back 1st Oct Losses

Gold rallied slightly yesterday during US session when President Obama reiterated that he will not be “held hostage” by the House Republicans, and offer to negotiate AFTER the Debt Ceiling and Government Budget issues have been resolved. This doesn’t sound much, and has been the stance that Obama has been adopting many months ago. Hence it is reasonable that Gold prices only pushed higher mildly, when US stocks basically ignored what Obama said and actually rallied during the meantime – so much for “crisis” fears.

Hourly Chart

Currently prices are still trading below the major sell off seen last Tuesday, which was triggered by a huge sell order by a huge institution. Interestingly, last Friday’s COT numbers actually showed an increase in Net Long positions suggesting that the rest of the institutional speculators do not agree with the lone wolf that has sold heavily. Bearing in mind that this week’s COT numbers will be a snap shot of today, if we see Gold prices trading above 1,325 by the end of US session today and corroborated with yet another increase in Net Long Positions this Friday, we will be able to safely assume that the 1st Oct decline has been fully negated and we will be able to see stronger bullish push once again.

Weekly Chart

Weekly Chart agrees to with the short-term bullish outlook especially if 1,330 – 1,345 has been breached, and we could see a rally towards the descending Channel bottom. However, long term outlook for gold remains bearish as long as price stay below 1,400. Even if price managed to breach 1,400 in the next few weeks, the descending Channel Top will provide yet another resistance and limit movement lower. And that is the most bullish short-term scenario; if we look at where prices are right now, Stochastic readings continues to suggest that bearish cycle is still in play which opens up the possibility of price pushing below towards the 2013 low.

Long term fundamentals agree as well. As QE is expected to be stopped in 2014, the reasons to hold gold will decrease. The only way this will change would be a unthinkable default by US whose ripples will be long lasting. Hence, prudent traders may wish to consider if speculating on long Gold positions right now is worth the risk right now, or perhaps it may suit their Risk/Reward ratios better if they choose to go long AFTER a US default has been confirmed.

More Links:
USD/INR Technicals – Bears In Charge Despite Latest Bullish Test
USD/JPY – Yen Bears Winning Battle But Losing War
WTI Crude – Strong Bullish Support Beneath 103.0

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