I believe that there is more easing coming from the US Federal Reserve soon, and plus Gold's ability to bounce off of chart support at the recent lows, may be the fact that causes the precious Yellow metal to rise over the next week or so.
Gold rose during last week. The most-active Jun contract settled after the US pit session Friday at 1,660.20, a gain of 30.10, or 1.8% on Thursday's close ahead of the Easter weekend. May Silver settled at 31.39, a decline of 0.34 over the same frame.
My works augurs the potential for Gold to rise in the near term based on the technical and fundamentals. On the charts, Gold has held at 1,600 several times.
There has been strong buying interest once Gold taps at the 1,620 to 1,625 mark and this is a good sign, it has been happening once there is some inkling the QE-3 is being taken off the table and once the QE-3 inkling comes back we see a nice 50+ rally.
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Fundamentally buying has resumed from India, for that past few weeks India's gold selling jewelry shops were on strike to protest tax increases on the precious Yellow metal. Indian jewelers reopened when the Counrty's finance minister signaled he would consider a rollback of the excise duty.
Shayne and I are of the mind that there will be some type of QE move by either the European Central Bank (ECB) or the US Fed or both, our feeling is that the central banks are just not finished, as the economic data has just not been strong enough to support not more economic stimuli.
It may not come as QE-3 per se, but it will come in another form. The US Fed can be very creative in how they go about additional monetary stimulus.
Gold has fallen back from the late-February highs, with the largest declines tending to come on days when some kind of Federal Reserve commentary was construed to suggest a reduced prospects for QE-3.
The market tends to chop around, as traders try to factor in what they think will happen, and expectations began to shift after a softer-than-forecast report of 120,000 non-farm job gains in March was reported on Good Friday.
And understand that a dovish Fed underpins Gold. The weakness in the US stock market, coupled with continued weak economic data, is likely to keep the idea of the next round of QE on the front burner. Gold trade is very sensitive to the hint of this kind of behavior from central banks.
Then we have the geo-political concerns as a supportive influence. Iran and the West in the past have refused to blink in an ongoing debate over Iran's nuclear program. Also, North Korea attempted to launch a long-range missile, an act that UN officials called destabilizing despite its failure.
It is a fact that any time we have a warring environment, it's Bullish for Gold.
Technically, Gold appears to be making an inverted head-and-shoulders pattern on a daily chart, which would be Bullish. But, it is struggling in here with some resistance at about 1,680. If Gold trades and close above that for a couple of days early next week, then I believe that boost some new buying and perhaps drive Gold back above 1,700, the psych mark.
On the other hand some analysts are looking for Gold to pull back next week, on fears that investors could be losing some of enthusiasm for commodities in general in here, as reflected by the inability of some commodities with Bullish demand-supply fundamentals to keep rising.
Gold has a Strong inverse relationship with the USD, and the Greenback seems to be gaining some momentum on increased concerns about Europe, and slower-than-expected growth in China. That bumped up the USD Friday morning, and it looks like it's like it will carry over into next week. If it does, I will anticipate more selling could come into Gold.
Comex Jun Gold's was not able to crack through initial resistance at the 38.2% fibl retracement of late February-early April sell-off, which is now at 1,682.60 oz. This past week's rally faded at 1,681.30 on Thursday and 1,679.20 Friday. 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.