Technical Update for Gold and Silver after QE3
Fed Press Release: (html)
After the Fed announced that it was adding $40 billion in MBS purchases a month at least to the end of this year, the market continued the direction as it had been when pricing in this event.
This pressures the USD across the board because basically launching QE3 to keep interest rates low is basically a way of increasing money supply of the US dollar, and we know from Economics 101, that when supply goes up given all else the same, price goes down.
We should also note that some assets are benefiting more from this central bank activism. Let's take a look at gold and silver, buyers of which are loving Bernanke and the Fed today.
Gold 1H chart 9:21PM EDT, 9/13/2012
Gold rallied sharply last Friday (9/7) after poor NFP increased the market's expectation of QE3. It then consolidated, but as noted in the previous update, with a bullish stance. Then after a quick shake, the market pushed gold above the 1762.82 resistance pivot, and continues to push it toward the 2012-high of 1790.20 as the market gets into 9/14 Asian trading. There is tough resistance here basically between 1790 and the 1802.70 high from from Nov.2011 as shown in the weekly chart.
Gold Weekly chart 9/13/2012
If you look at the RSI in the weekly chart, it shows that during 2011-2012 consolidation so far, the reading has remained above 40 during the 2011-2012 consolidation. This suggests that the long-term momentum remains bullish, and maybe re-emerging. If you have a bearish outlook from around the 1800 handle, you should probably be conservative as it would be going against a revival of an up-trend.
Silver 1H chart 9:35PM EDT 9/13/2012
Yesterday's (9/12) sharp dip was caught by the 200-hour SMA, and returned to the 33.23 pivot ahead of the FOMC meeting. After the QE3 announcement, we saw a sharply rally that is still extending during the early 9/13 Asian session.
Silver Weekly chart 9/13/2012
As we look at the weekly chary, we see that unlike gold, silver has lost some bullish momentum. Still there is some room until the next key resistance pivots at 35.66 and the 2012 high at 37.50. This will be a tough barrier to break, but if does, it opens up the 44.18 pivot.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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