Outlook and Recommendation

Following the sharp gains for GOLD prices during January when gold prices rose by 11% and the situation in February was much different. Gold price increased by only 2.07% from the end of January. What were the events and decisions that may have affected the direction of gold. Part of it might have to do with the recent decision of the EU leaders to approve the bailout package for Greece.

Gold prices started February with little changes; this no-trend, however soon turned into sharp gains.

If we separate February into two parts: with the breaking point at February 17th; during the first part of February, gold declined by 0.8%. During the second part of February, gold price climbed by 2.9%.

During the first part of February, the U.S dollar slightly depreciated against the Euro, the Canadian and Australian dollar; the last two currencies are usually strongly correlated with gold; during the second part of February, the U.S dollar sharply depreciated mainly against the Euro; this shift might partly explain the sharp increase of gold during the second part of the month.

Although this simplifies everything, there were a great deal of geopolitical problems, financial and economic crisis and turmoil, throughout the world, but mostly from the eurozone. When the markets are uneasy they turn to gold, and we saw this several times over the past few months. Global problems have no subsided, but investors are becoming more confident in the handling of these problems by the EU and are therefore taking on more risk. With slow but steady improvement in the US, investors are moving from the USD and Gold looking for more appealing investments. The short term for Gold will be a continued fall to trade between 1675 and 1700 throughout the end of the month and to increase over the second quarter moving towards 1800.

Understanding Gold:

When fundamental AND technical forces are in alignment, as with the current situation in gold, price action traders have an extremely valuable opportunity because trading with price action allows for much more accurate entries than other methods as well as providing traders with a set and forget style of trading when used in combination with simple risk to reward scenarios.

Gold prices always rise when there is uncertainty in the global economy. In times of uncertainty, wealthy investors tend to run towards gold. Suppose, rumors are flying high about some event in the world and this is increasing the uncertainty in the financial markets. Gold prices are on the rise again. You now buy three gold contracts. By the end of the week, each contract is up by 100 points. You make a cool $3,000 when you sell the three contracts. This way, you complete your third trade in a series of four trades.

This is a very simple gold trading strategy that depends on pyramiding your position with a series of four trades and removing all the profit from your account at the end of these four trades. With practice, you will find this gold trading strategy very simple and easy to implement.

  • Gold reacts to uncertainity in the markets A drop in major currencies can indicate a run into gold. Remember investors tend to take profit from gold so watch for trading opportunties when investors are taking profits, not moving out of the markets.

Historical

High:     1916.20

Low:      1321.10

Gold Forecast Chart

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Gold Pivot Points (Time Frame: 1 Day)

 

Name S3 S2 S1 Pivot R1 R2 R3

Classic
1685.23
1694.92
1703.43
1713.12
1721.63
1731.32
1739.83

Fibonacci
1694.92
1701.87
1706.16
1713.12
1720.07
1724.36
1731.32

Camarilla
1706.94
1708.61
1710.28
1713.12
1713.62
1715.29
1716.96

Woodie's
-
1694.63
1702.85
1712.83
1721.05
1731.03
-

DeMark's
-
-
1717.38
1710.99
1699.18
-
-