Nov 9, 2010
Momentum indicators might cause some kind of technical hesitations but as far as trading remains above 1380.00, our crab pattern is still valid and the negativity of these indicators could be canceled out. Areas of 1430.00 could be visited but we should witness a breakout above 1404.00-1406.00 levels first. Our bullish harmonic scenario of resuming the pattern is still in favor as far as the daily closing is above 1372.00.
The trading range for today is among the key support at 1358.00 and key resistance now at 1405.00.
The general trend over the short term basis is to the upside, targeting $ 1430.00 per ounce as far as areas of 1120.00 remain intact.
| Support | 1385.00 | 1380.00 | 1372.00 | 1365.00 | 1358.00 |
| Resistance | 1395.00 | 1400.00 | 1405.00 | 1412.00 | 1425.00 |
| Recommendation | Based on the charts and explanations above our opinion is, buying gold around 1385.00 targeting 1430.00 and stop loss with a daily closing below 1372.00 might be appropriate. | ||||
News and gold strategy 09.11.2010
Gold Upward Momentum Continues for Fourth Straight Session
Gold Landed in 1400 Zone as European Debt Crisis Back in Picture
| 09 Nov 2010 | 1st resistance | 2nd resistance | 3rd resistance |
| Today’s resistance US$ | 1417 | 1426 | 1441 |
| | 1st support | 2nd support | 3rd support |
| Today’s support US$ | 1394 | 1378 | 1370 |
| Today’s pivot point US$ | 1402 | | |
The Day’s Story:
Gold peaked to another record high on Monday making its third record in 3 sessions as strong investment demand drove the precious metal above $1400 psychological level. Gold which usually moves in opposite direction to U.S dollar ignored moderate gains by greenback as inflationary fears strengthened after the announcement of FED’s fresh stimulus package of $600 Billion. Another factor that came back into play was renewed fears over European debt worries as cost of insuring Irish and Portuguese debt against default rose to a record high. Gold benefited from European sovereign debt worries in the first half of this year due to its safe haven appeal. Gold was also lifted by comments made by World Bank President Robert Zoellick that there needs to be a global "co-operative monetary system" involving multiple currencies as well as using gold as an "international reference point of market expectations about inflation, deflation and future currency values." Zoellick says that gold is not old money but that markets are using the metal as a viable alternative to paper currencies. Gold is in win-win situation at the moment whether its dollar weakness due to inflationary fears or European Debt crisis, investors seem to have moved out of paper currencies and put their faith in precious metal. Gold has outperformed stocks, most commodities and currencies this year so far and looks set to post its 10th annual gain.
U.S stocks ended mixed with Dow Jones Industrial average and S&500 moderately lower while NASDAQ finished its day a tad higher. Renewed fears over European sovereign debt problems gave investors enough reason to pause after strong gains in recent weeks. Last week’s gains which helped U.S indices to move to pre Lehman crash levels were mainly contributed by Republicans election win and QE2 along with positive jobs numbers on Friday but some analysts believe market may have over reacted to those news stories. There is no significant data due to be released this week that could cause sharp price moves in stocks and commodities. Market will be taking clues from G20 meeting in Korea later this week in which currency valuation will be the main focus for participants after U.S turning the heat on Germany and China over the issue.
U.S dollar rose for another day and sought most of its strength from euro weakness due to re- emergence of
concerns over European debt issues. U.S dollar also rebounded at the back of a short covering rally after its recent losses and massively over sold technical status. Gold and dollar’s inverse correlation took another hit
yesterday when both ended in positive territory. Gold was supported by its safe heaven appeal at the back of European debt crisis appearing back in the picture. Gold and dollar both rallied in first half of this year at the back of debt problems in Europe as investors turned to safe haven assets in the time of heightened economic uncertainty. We may see further short-term gains in U.S dollar but its overall outlook remains bearish which is an underlying bullish factor for gold prices. If European debt problems worsen and make headlines again, gold will have one more reason to advance further.
Many of us never thought of seeing gold to its recent levels but as long as uncertainty looms over global economic outlook and unless Governments and Central Banks get their acts together, expect more surprises from precious metal. I would also like to point out Silver’s run to record 30 year high as it has attracted a lot of attention in recent months. Silver which is considered poor man’s gold has outperformed gold due to its increased investment as well as industrial demand. In other outside markets Crude Oil gave away some of its recent gains but gold was largely unaffected by Oil’s such move.
Gold price started its Monday session with minor losses after strong gains in previous week. Gold remained mildly under pressure throughout Asian trading session and fell to its intraday low of $1386.9 just before markets in Europe started their trading day. Gold traded with no particular direction in early hours of European trade and after recovering a bit fell close to its intraday low just before North American markets opened for their first session of the week. Gold picked its direction early during U.S trading hours and headed north breezing past $1400, a strong psychological resistance level. Gold peaked to its fresh all time high of $1410.5 an ounce and closed just below its session high at $1409.5 an ounce.
Other Metals:
Silver futures for December delivery closed up 68.0 cent to $27.43 an ounce on Monday.
Platinum futures for January delivery rose by $2.20 to $1,772.10 an ounce on NYMEX.
Palladium futures for December delivery rose by $25.50 to $710.90 an ounce.
December N.Y. Copper closed up 1 cent to $3.96 a pound on Monday.
Gold (News and Views):
December Comex gold closed up $5.50 at $1,103.20 an ounce on Monday. The London P.M. gold fixing was $1,388.50 on Monday compared to its previous P.M fixing $1,395.50. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings fell to 1292.189 tons on November 02 down from 1293.101. The dollar index, which measures the U.S. currency against a basket of six major currencies, rose 0.44 to 77.05 on Monday. Crude Oil for October delivery fell $0.34 to settle at $87.06 on Monday on New York Mercantile Exchange. Gold hit its true peak on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation in 1980 dollars, that translates to an all-time record of $2,184.08 an ounce, in 2010 dollars.
Factors Affecting Gold Price Yesterday:
Phil Streible, senior market strategist at Lind-Waldock, says the "spreads between Ireland and Germany are widening, which is telling you that Ireland is become more and more risky." Streible says that the Fed's bond purchase program has provided clarity and stability for the U.S. market and that now the focus is turning on Europe.
"The bond situation in Ireland was worse than expected, so investors looked to move money into a safe haven, which is gold," said Michael Daly, gold specialist at futures broker PFGBest.
People have gotten to the point that they have lost confidence in fiat currencies and they are choosing gold as their currency of choice," he said
A Comex most-active gold contract has surpassed $1,400 an ounce for the first time, and the main catalyst appears to remain last week’s Federal Open Market Committee announcement of a second round of quantitative easing, says a New York trader. Otherwise, he says, the economic calendar is light. “QE2. That’s it. I can’t think of anything else,” the trader says. “It’s been a quiet day and we had little in the way of economic news…It’s just people who are hedging their bets against this QE2 business.”
“No one wants to hold currencies now,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The big money is looking at gold as an alternative asset.”
Many investors see the $600 billion committed by the Fed's bond-buyback program last week as bigger than initially thought, and they have no choice but to buy precious metals as a hedge against inflation, said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.
"Gold is in uncharted waters, and it is going to keep reacting to fresh money (from the Fed) coming into the market," Perez-Santalla said.
Gold Future Outlook:
Much of the focus in Comex metals this week may be the start of the roll-over into future contract months, particularly since the U.S. economic calendar is light, says George Gero, precious-metals strategist and vice president with RBC Capital Markets Global Futures. Gold is softer so far this morning, but Gero describes this as largely selling to book profits after the market digested key news events last week, including quantitative easing and U.S. non-farm payrolls. Some traders are likely to start adding sell stops in order protect their profits if the market should pull back, he adds. This is not immediate selling, but selling that would be hit if these pre-placed orders were triggered. “There is not much in the way (economic) news this week. It could be a light, quiet week, although it is the beginning of rollover,” Gero says. Traders will likely start rolling December gold into February, and December silver and copper positions into the March futures, he explains.
George Gero also says that gold could hit $1,500 by the end of the year as record open interest provides good support for technical trading.
Gold "remains vulnerable to risk reduction and short-covering rallies in the dollar," says James Moore, analyst at thebulliondesk.com. Moore, however, does believes that investors will continue to move into gold as protection against the Fed's looser monetary policy.
Precious metals will benefit as China invests in more commodities, Lind-Waldock’s Klopfenstein said. The country has become the world’s biggest market for commodities-futures trading, Jiang Yang, the chairman assistant of the China Securities Regulatory Commission, said at a conference in Guangzhou on Nov. 6.
“Gold will benefit from any sovereign-debt fallout,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “Gold is going to continue to be bought on dips because no one believes the dollar can stage a significant rally.”
“The debt load that countries are carrying makes people want to go into gold,” LaSalle’s Zeman said.
The ability of gold and silver prices to hold up despite recent declines in the net long position of speculative accounts suggests that any correction in the metals could be modest, says Commerzbank. Gold overnight threatened $1,400 an ounce again and was just shy of 1,000 euros. Commerzbank says “the reduction of (speculative long) positions has not been accompanied by falling prices in the case of gold and silver, so the correction potential for these two precious metals is likely to be limited in our view, even if we do see a further fall in positions.”
Technical Analysis (by Jim Wyckoff):
Technically, December gold futures prices closed nearer the session high Monday. Gold bulls have the solid overall near-term and longer-term technical advantage, and gained more upside power Monday. A 3.5-month-old uptrend on the daily bar chart is in place.
Bulls' next near-term upside technical objective is to produce a close above technical resistance at $1,450.00. Bears' next near-term downside price objective is closing prices below solid technical support at $1,350.00. First resistance is seen at Monday's all-time high of $1,407.20 and then at $1,412.50.
Support is seen at $1,400.00 and then at $1,390.00.
Wyckoff's Market Rating: 9.5.
Daily Gold and Silver Expected Range:
Gold: US$1385- $1424
Silver: US$26.95 - $27.95
Weekly Technical Outlook ( by Phil Smith)
The market reacted to its very overbought condition after hitting a key Fibonacci Projection level on the daily
chart. It is now driving higher towards the next Projection level on the weekly as you can clearly see on the second chart.
I’ve put a Fibonacci Projection on this chart drawn from the points indicated and you can see that the 38.2 pct was significant as was the 61.8 pct although there was some penetration. The 61.8 pct was also support as you can see. According to this the long term first target is 1,454. But remember but all measures this market is well overbought.
Caution is needed. Check out the Relative Momentum Index which is at levels where pullbacks have occurred in the past. Overall the weekly gold chart is bullish but still overbought.
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