Join        Login             Stock Quote

Gold's Technical Breakout Paves Way For Further Price Action

 November 26, 2012 07:08 PM

(By Mani) Gold's much awaited technical breakout on Friday now presents the potential for much more exciting price action over the coming days.

While illiquid trading conditions certainly enabled the move, this week with returning US participants and in turn more "normal" trading conditions, the hope is that this technical and momentum turnaround presents gold with the ingredients to target $1800, once again.

"We're not expecting an immediate rush into gold. The uncertainty surrounding the Euro group meeting on Greece has impacted the EURUSD and in turn gold," UBS strategist Edel Tully wrote in a note to clients.

Gold players will need time to assess this technical breakout, but the inclination should be of the friendly variety. Looking at the order book, it doesn't give a clear signal, with little either side of $1750.

[Related -How To Tell If The Market's Rebound Is Sustainable]

"Before Friday's breakout, we observed a client base that was quite frustrated with gold, although not so fed up to short the metal, but certainly unmotivated to return to the market in any kind of size until a technical breakout occurred. Now that's happened, the next 24-48 hours of price action should be quite interesting to observe," Tully said.

The longevity of those who entered long positions on Friday will also be critical. In a sense, much rests of the patience level of participants from here. The risk is that given the recent subdued sentiment, failure to trade above $1750 could quickly lead to yet another wave of disappointment.

While there has been little appetite so far to push the market aggressively higher, some eagerness is expected to buy dips in this cautiously optimistic atmosphere.

[Related -Get Positioned For Gold's Comeback Now]

Certainly, last week's confirmation of strong official sector buying in October helps matters, somewhat providing investors with an alternative comfort blanket after physical demand disappointed this year.

"The assurance that central banks are likely to come in and help insert a gold price floor certainly helps encourage other market participants to buy dips," Tully wrote.

From a technical perspective, Friday's sharp advance has seen the MACD settle above its zero line and closing break of $1748.95, the 62 percent retracement of the October/November sell-off. This bullish development suggests there is potential for more upside in the near-term and resistance is at 1774.98 ahead of 1796.05, the October high. Support lies at 1728.35, the Nov. 22 low.

In the week to Nov 23, gold ETF holdings extended 0.08 million ounces (moz) to 88.02moz. Investors made additions to their holdings in the iShares fund to the tune of 38koz, ETFS (LSE) fund rose 49 thousand ounces (koz), ZKB fund was up 11koz and UBS fund rose 12koz. On the contrary, db Physical Euro Hedged fund was down 19koz, SPDR and CS Gold funds were down 14koz each.


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageHas Warren Buffett Found The Best Investment In Oil?

Shares of oil stocks plunged again as the price of West Texas Intermediate wiped out nearly half of its read on...

article imageDemand For Safe-Haven Bonds Surged Last Week

The crowd piled into investment-grade bonds last week as economic worries triggered an exodus out of risky read on...

article imageThoughts on MetLife and AIG

In some ways, this is a boring time in insurance investing.  A lot of companies seem cheap on a book and/or read on...

article imageA 2016 Recession Would Be Different

If the US or the Eurozone entered a recession this year, a few macroeconomic variables would look very read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.