The gold markets fell slightly during the Monday session in an otherwise quiet day. The gold markets have recently sold off, but the underlying reasons for gold strength still remain. Certainly, the world hasn't suddenly become a more stable place, and the Europe situation isn't going away anywhere too soon.
The recent selloff from the $1,800 level was brutal, and since then - we have seen the market sit still. This is the kind of market we were looking for in order to get long of this contract again. The governments around the world are more often than not working to devalue their currencies. The easy monetary practice practiced by these central banks will almost always push money into the gold markets to store value and wealth.
The $1,700 level continues to be supportive, and we like the way this market has calmed down after such a massive fall. This in fact is exactly what we were waiting for, and now we look at the candle from the Monday session as a signal in and of itself, as it is a hammer right on the supportive $1,700 handle. Because of this, we think that we are about to see a rise in the value of gold, and would be willing to buy on a break of the top of Monday's range, as it shows sellers losing the momentum that they have enjoyed over the last few sessions.
The breaking of the bottom of the Monday range would in fact be a very bearish signal, but we don't like the idea of selling gold as a whole, so would probably ignore this signal. The market is very technical, and we think that we have a line in the chart that tells us exactly where we should be. As long as we are above the $1,500 level, we will only buy this market. Of course, we won't do it randomly, but based upon the price action that forms in the market. Any supportive candles at a $50 interval will be considered going forward as a buy signal. We won't sell until we get below the $1,500 level, and we don't see this happening anytime soon.
Gold Forecast March 6, 2012, Technical Analysis
Gold Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3