Gold markets rose during the Tuesday session as the bull market continues. The $1,750 level was tested, but ended up holding the market down. The level is a serious resistance point, but the momentum is without a doubt upwards. The market has made a strong run over the last few sessions, and as a result the failure to break through the level wasn't all that surprising.
The area looks like a good spot for a pullback, and the fact that the daily candle from Tuesday is a shooting star only lends itself to confirm the likelihood of that pullback. However, the $1,700 level should be supportive, so we are not selling - but rather waiting to see if this market will pullback and find support down near that level so we can buy it on a cheaper price point. A break of the top of the Tuesday shooting star is also a very bullish sign and would force us to get involved on the long side at that point in time.
The Bank of England is expected to announce further quantitative easing in the next week, and the European Central Bank is almost forced to do it at this point. In fact, there are people who say that the EUR/USD needs to be at parity in order for the peripheral countries to ever get out of the problems they are in presently. Also, the Federal Reserve looks to do quantitative easing for a third time in 2012 by all measures - so in this kind of environment gold will almost always outshine paper currencies. In some ways, gold is now a major currency as central banks are net buyers, and the public as a whole continues to trust fiat currencies less and less.
The market is still a strong one for gold, make no mistake. However, we do see this pullback as being very likely, and are willing to wait for lower prices in order to take advantage of gold being on sale. We are looking for hammers and engulfing green candles (even on shorter time frames) near the $1,700 level in which to buy.
Gold Forecast February 1, 2012, Technical Analysis
Gold Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3