Gold Future (/GC)
HI guys, I apologize for not having any update on gold lately but here is what I think about the gold future price. From the macro perspective, market sentiment is overall optimistic, gold price should find it hard to go higher. With declining unemployment rate, near zero interest rate and the Fed reassured the absence of QE3 in the near future, these factors should provide strength to the dollar value. And because the dollar is inversely related to the gold price, gold price should find some more resistances to the upside. However, some underlying concerns still exist in the market, if the Europe debt crisis worsen or corporations fall short on earnings as we move into earning season, this will definitely hurt investors’ confidence in the dollar, causing them to move their money into safe heaven assets, such as gold, again. Nevertheless, below are my technical analyses on the gold future charts:
(Daily Chart)
- A mix of bullish and bearish signals present in the daily chart, I think it’s better to let the chart develop a little more before choosing a side to go with.
- Potential bearish golden cross @ $1695.5. Right now the 50 day moving average (50 SMA, grey in color) is touching the 200 day moving average (200 SMA, white in color), when the 50 SMA crosses below the 200 SMA, it is a bearish signal. Notice that the 50 SMA touched the 200 SMA once in February and bounced off it, I think the retest here is likely to result in a bearish golden cross. However, if the 50 SMA bounces again, this shows significant strength in the gold price, betting on the upside will be a better choice.
- As the gold price approaches the 200 SMA @ $1695.9, the moving average will be a strong resistance level. If the up move is imminent, gold price will take sometimes to clear the 200 SMA resistance.
- The last 2 candlesticks in the chart form a bearish tweezer top pattern. Both candlesticks opened and closed near the same price but their directions were completely opposite, signaling a sentiment change in the short term. And because the final candlestick is a down bar, gold price is expected to retreat in the next couple days.
- Gold price resumed to the down channel in early March and continued lower since then. Coincidently, a bearish tweezer top appears at the channel top, signaling a downward continuation within channel until gold price finds support @ $1600.
- On the bullish side, I see an inverted head & shoulder pattern developing since September 2011. The inverted shoulders’ top @ $1600 will be a main gauge to watch because gold price hasn’t gone under $1600 since the beginning of 2012. If gold price bounces on the $1600 number, I expect the move goes up to the neckline resistance @ $1792.3. If the gold price takes another step further above the neckline @ $1792.3, this will become a confirm breakout on the head & shoulder pattern, one should look for the gold price to go as high as $1923.7 for a completion of the move.
- If the $1600 level doesn’t hold, watch the gold price to consolidate near the major support level @ $1546.5, a breakdown on this level may lead to another round of sell-off that should take price down to $1484.5.
(Hourly Chart)
- For the next day or two, I think the gold price will retest the down channel top or the resistance #1 level @ $1664.6 and fail, completing a 1-2-3 move to the downside.
- Minor support levels are found @ $1648.1 and $1640.3. A breakdown on the $1640.3 level should bring the gold future price to the bottom of the downward channel, which is around the $1600 level.
- On the upside, each prior pivot high is a minor resistance. Gold price may consolidate a little at $1685.3 and $1697 as it moves higher. If one decides to take a quick long trade, these minor resistance levels can be reference points for profit taking and the final target will be the resistance level @ $1706.2.
- (Possible Trade) – a quick short selling position @ $1664.6
- Target: Completion of the 1-2-3 down move at the support level @ $1648.1, which is a 24 points target
- Risk: 5 points risk @ $1670
I hope this post offers you some insight, thank you for reading and please feel free to give me some feedback.
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