A few weeks ago I wrote that the short-term outlook in Gold was Bullish, in the meantime, the public has been Bearish Gold all year and lots of "dumb money" started to exit the market. It is this combination of factors that lead me to a firm Bullish mode into the end of the Summer.
My Bullish POV is based on fundamental's and technical's. Technically last week saw strong volume in Gold at 1,641.55, followed by a 20 dollar move North. That makes 1,641.55 a good support mark on a technical basis. It is where traders will be putting money to work which creates price Support from a former Key Resistance mark.
Monday morning I wrote: A Bull Flag may be forming up on the daily Gold chart. Should that confirm over the next week or so it augurs a move back to the 1,740.00 mark.
This is a major Northside target for Gold Bulls for a move back at the February high at 1,792.70/1,800.90 oz.
The rise also forms up the trader's fundamental POV: some of the debt ravaged European countries have been huge sellers of Gold to pay down some of that debt, Portugal for instance sold $500-M of their Gold assets in a year, that puts a tremendous amount of pressure on the downside and when that selling stops (Gold is absorbed by other buyers including central banks), sharp gains follow, the overhead resistance cracks and the Gold Bulls grab the momentum
The big victory for the Gold Bulls comes when the USD breaks and heads South. Of course every Bull trader is looking for the next round of stimulus from the US Fed and the ECB that turns on the liquidity faucet. What I am looking for this the US Treasury to continue to weaken the "Greenback" because less valuable USD's means more expensive Gold for those buying with Dollars.
My near term price target is 1,700 (there should be some profit taking here) with support at 1,641 followed by a move to the upper trend line resistance at 1,770 and then extending to 1,792.70 the next Key resistance mark. A clear break there will drive it the psych mark at 2,000 eventually. Stay tuned...
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.