Gold Sees Short-Covering Bounce

Gold futures prices are moderately higher and waiting another upside technical correction and short covering following recent selling pressure that on Monday drove prices to a nearly five-month low.Due to Pre-holiday trading atmosphere (the U.S. Thanksgiving holiday is on Thursday) Wednesday Market would expect to be quiet and also it’s a very busy day for U.S. economic data. That data could move the markets—especially if trading volumes are already thin. February gold was last up $9.40 at $1,251.10 an ounce. Spot gold was last quoted up $9.10 at $1251.50. 

A heavy slate of U.S. economic data to be release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders, weekly jobless claims, the Chicago Midwest manufacturing index, the Chicago Fed national activity index, the ISM Chicago business survey, the University of Michigan consumer sentiment index, leading economic indicators, and the weekly DOE liquid energy stocks report. Any of this data that is significantly outside of market expectations could move markets, especially as many traders have already out from the crowd in order to get a jump on the U.S. Thanksgiving holiday.

Technically, February gold futures bears still have the overall near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to close above solid technical resistance at $1,275.00. Bears' next near-term downside breakout price objective is to hit closing price below solid technical support at $1,200.00. First resistance identified at this week’s high of $1,258.20 and then at $1,261.80. First support is at the overnight low of $1,241.00 and then at $1,230.00.

Gold Seem Corrective Technical Bounce And Short Covering

Comex gold futures prices are modestly higher and constructing an upside technical correction and short covering followed by recent selling pressure that on Monday drove prices to a nearly five-month low. The point “outside markets” are in a bullish posture for the precious metals in Tuesday, as the U.S. dollar index is weaker and crude oil prices are firmer. 

It’s a quiet and uneventful market place for Tuesday. Overseas stock markets saw some mild profit taking from the Monday’s rallies. Trading activity and market volumes may continue to dwindle as the week progresses, due to the U.S. Thanksgiving holiday on coming Thursday.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, new residential construction, the Richmond Fed business survey, and the S&P/Case-Shiller home price index.

Technically, February gold futures bears still in the overall near-term technical advantage. The gold bulls’ next upside near-term price breakout need to be above solid technical resistance at $1,275.00. Bears' next near-term downside breakout price at below solid technical support at $1,200.00. First resistance is seen at the overnight high of $1,258.20 and then at $1,261.80. First support is seen at $1,240.00 and then at the July low of $1,230.00.  

Gold's Slump May Continue This Week; $1,220 A Possible Target

After breaking technical-chart support last week, gold seems to be fall further, with some market watchers suggesting a dip at $1,220 is possible as bearish technical charts and little positive news is available to offset the price-negative sentiment in gold.

Gold-price weakness accelerated last week following by the release of meeting minutes from the Federal Open Market Committee, which suggested that the Fed would like to scale back their bond-buying program sooner rather than later.

Thus pushed prices lower and selling on last Thursday took gold through technical-chart support at $1,250, which a lot analysts saw as important for the market to hold since it was the bottom of the current range.

From the technical charts, whether looking at daily or monthly charts, it were bearish for gold. The daily charts are suggesting an eventual test of the June low which comes in at $1,179 (which is $1,183.20 using a futures continuation chart) and perhaps it might fall to $1,160.

On the monthly charts gold is forming a triangle pattern, which is a continuation of the current trend by showing a bearish technical chart.

Gold Slides After FOMC Minutes

When the policy-makers start scaling back their bond-buying program " sooner rather than later" is the factor that likely to hurt the metal.

The minutes showed FOMC officials sense it might be possible to slow their bond-buying program at “one of its next few meetings” and also do so without labor-market improvement. They also considered setting a calendar date to end asset purchases or set a total size limit on bond buying,

The FOMC minutes came when gold already had in a  softer tone and money flows have not been favorable. The most recent data from the Commodity Futures Trading Commission showed that speculators had pared their net-long position by increasing their total shorts.

FOMC Minutes To Create Short-Term Volatility For Gold

While the market place is awaiting the U.S. Federal Reserve’s FOMC minutes release on Wednesday afternoon. The minutes will be from the October meeting, and as always traders and investors will be looking into the report for any fresh clues on Fed monetary policy moves upcoming.

Fed Chairman Ben Bernanke had gave a speech on Tuesday night, in which he extolled the virtues of continuing an easy U.S. monetary policy. This remarks were not surprising and the markets were virtually unfazed by the outgoing Fed chief’s comments.

There is also other important U.S. economic data due for release Wednesday, including the consumer price index, real earnings, retail sales, manufacturing and trade inventories, existing home sales, and the weekly DOE liquid energy stocks report which are Traders or Investors would like to looking into it.

Thus the volatility is there. It is better to be stand out of the market to watch out before entering the market.

FOMC Minutes Awaited: Gold In Weak Tone

Gold with the trading down to the $1,268 support level yesterday.

And yet the Fed minutes released tomorrow believe that will not show a different perspective than that came out from the lips of Janet Yellen, had creates enough of a “what if” to hold the market. 

Technically, February gold futures is in the Bear side. While it believe that the gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance which at the November high of $1,327.40. While Bears' next near-term downside breakout price objective is closing prices below the solid technical support at the October low of $1,254.00. 

First resistance is seen to be at $1,280.00 and then at Monday’s high of $1,289.60. First support is seen at the overnight low of $1,268.80 and then at last week’s low of $1,261.80.  

Gold Potential to be Waterfall Crash Within Next 30-40 Trading Days

Waterfall Crash Within Next 30-40 Trading Days

Over last one and half month, gold deviated and follow by the dollar down which would be a warning sign that gold would be in trouble when the dollar began rally out. Last three weeks, when the dollar rallied gold turned back around and it turned around almost to the exact day that dallar started this rally. There is a few important support zone.

The first important support zone is from last month at $1251, and definitely that gold is going to breach that over the next week to week and a half. Fed minutes next Wednesday will probably be the trigger to put in a bottom to this decline and at least a short-term bounce.

Probably either Thursday or Friday, gold is going to pass through the support of $1251 level, and when it does, it’s going to trigger a lot of stops. It probably going to get a very fast and violent move down to that June low, It believe to be at $1179. If that occurs, either on the Fed minutes next Wednesday, or the day in front of or behind that event, it’s probably will direct to the daily cycle low. That might trigger at least a short-term bounce.The dollar is going to be done rallying though. Eventually dollar rally will have to go at least one and a half daily cycles, so it likely to be happen, and it lead fairly weak bounce off that June low, which will roll over pretty quickly, and if gold penetrates $1179—a lot more stops are going to get run.

I expect it will be a typical pre-market, middle of the night hit, where you see 200 tons of gold dumped into the market with no buyers appear to support it. They’ll penetrate that support zone and trigger all those stops, so that when traders wake up in the morning, their positions are already deeply underwater and in margin trouble. That will exacerbate the selling, and I think we’ll probably see a very quick waterfall decline, maybe even as quick as three or four days, that will take us down into that 2007 top zone which around $1030-$1050. That’s the point at which I think we have a chance to stop this bear market and begin the bubble phase of this secular bull.

Learn From Gold Trend

Types of Trend basically consist of 3: 

a) Uptrend

b) Downtrend

c) Side Way Trend

The Important to had macro understanding on how markets move assist in understanding the cycle of market movement. Hereby we look back the historical Gold Charts and see the nearest decades movement.

Charts below shows price have been, and guide the clues to repeating patterns and where it will lie ahead for the future. 

From here, we can clearly see that from 1976 into 1980 peak, the gold futures from $ 101.5 per ounce rapidly growth to $ 873 per ounce. Obviously that is a big bull uptrend. Human is trade on emotions. This chart had show the fear and greed. Fear of missing out the chance in the bull move and Greed of wanting rush into a "Bull".

From here, the market start to stay backed and grooming into a sideway trend from around year 1982 to 1996 which gold being traded between $ 514 and $ 281. A 14 years sideways trend.

In the late 1990's gold started be traded in a low price about $ 320 on the upside and $ 255 on the downside. It ended the bears trend and forming the bulls trend. While a lot were still proclaiming gold to be a " dead " market and obsolete at this time.

Anyway, the cycle began to change and between 2001-2002 the bull of gold is in part and launched into a decade long uptrend cycle, which lead to the peak of above $1900 an ounce in the September 2011.

The history of chart had hints us- In Oct. 2012 to summer 2013 might be similar to September 1980-june 1982 sell off-- it could be leading to a anohter big long side way trend.

The major point here is?
a)Markets move in cycles.- It will repeat
b)Gold has likely end its decade-long bull cycle and is shifting into a sideways cycle.
c)In the sell-off after the 1980 peak, the market had been retraced around 61.8% of the entire rally move
d)The current sell-off from the 2011 peak is not even retraced 50% of the major bull run cycle—that means gold is in a stronger longer-term position now than it was after the 1980 price collapse.

Looking forward, there may be a long period of large sideways trade. The daily December Comex futures chart shows the range to be roughly $1,490 to $1,182 per ounce. This has offer a tradeable trends on a multi-day to multi-week basis for position traders. Retreats toward the range bottom would offer buying spots for long-term investors.

A lot of people believe that there will be another crisis around the corner for our global financial system, is just might be a matter of next year or in three years. Gold started retreated off its 2011 peak, but has not even retraced 50% of its major bull run cycle. Gold bulls are just biding their time. But, please be prepared that the sideways cycle would take some time to play out.

By,

Tim Tan