Gold Technicals – Rebounding off 1,296 Despite Long-Term Bearish Pressure

Gold prices traded lower yesterday following the announcement of Obama’s nomination of Yellen as Fed’s Chairman. The appointment of the current Vice Chairman to take over Bernanke would almost certainly ensure that Bernanke’s vision and previously mentioned QE timeline will be adhered to. Even if she is her own person, having Yellen who has had experience dealing with the FOMC (unlike Summers) means that she will be able to take over the reins with confidence and the transition will be extremely smooth. Hence, this lack of hiccups and bumps would mean there is less need for safety assets such as Gold, sending the yellow metal towards a low of 1,295 yesterday. Prices rebounded slightly after New York noon but traded back below the 1,306 support turned resistance quickly.

Hourly Chart

Asian session today saw prices staying mostly under the 1,306 resistance once again, with prices descending quickly during European session following a failed push to reclaim grounds above 1,306. This decline is also aided by rumors of US politicians getting one step closer to brokering a deal that will resolve the Debt Ceiling temporarily until December. As a result we have prices currently moving towards the 1,296 support once again. However, technicals suggest that 1,296 may be able to hold with Stoch readings currently close to the Oversold region, hence we could potentially see yet another move towards 1,306 once again during US session later.

Weekly Chart

Weekly Chart is much more bearish, with Stochastic readings a good reflection of the bearish momentum that has started from the Channel Bottom bearish rejection back in late Aug/early Sep. Stochastic levels are below the 60.0 “support”, suggesting that the bearish momentum may continue strongly once again after some hiccups 2-3 weeks back.

This actually follows the long-term outlook better where Gold prices are expected to fall due to eventual conclusion of QE stimulus program in 2014 and the expected resolution of US Debt Ceiling fiasco. Nonetheless, prices are being kept afloat now with institutions still buying up Gold for speculative reasons. Should price break below 1,270 – 1,275 support zone we could potentially see huge bearish acceleration with the aforementioned institutions clearing their long positions, bringing us quickly back lower towards 1,200 and the Channel Top below.

More Links:

GBP/USD – Falls Strongly back to Key 1.5950 Level
AUD/USD – Remains very quiet above 0.94
EUR/USD – Touches One Week Low below 1.35

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.