Gold Technical Analysis

Thursday, January 3, 2013, Marketing Communication Gold, Monthly Please click on the graph above to open a larger image The monthly timescale naturally takes the long term view so the commentary in this section will only be updated as and when market events dictate. So regular readers of this report will only need to read the monthly and weekly sections on a relatively infrequent basis. However we include all the information to give new readers the full picture. The Monthly graph above shows the stellar performance of Gold over the past 25 years. From lows of under $300 at the start of the millennium up to the powerful trend to highs posted this year. This graph is all the more extraordinary as this is on a semi-log scale, which gives percentage gains the same scale on the Y axis. Detailing how the cumulative gains posted in recent years have kept pace with the early gains posted 2000-2002, and even accelerated higher, red lines. It has hard to imagine the longer term bulls getting too concerned while the price action remains well above major support areas. Leaving a positive long term outlook, with only a break under the 2012 lows negating this optimistic stance. Gold, Weekly Please click on the graph above to open a larger image The situation on the Weekly chart will also take some time to change greatly, so the text below may remain broadly same week to week unless major levels are broken. As with the monthly chart we will update the graph each week, and post all the text so that new readers will have all the information to hand. The Weekly chart details how after a brief bearish trend in 2008,  the commodity posted a strong bull trend, red region. This move brought the metal up to all time highs, not inflation adjusted. From these highs the commodity posted a correction, and set up the very widely reported descending triangle pattern, gold lines. Due to the importance of the triangle formation we would not see the medium term buyers becoming too nervous while the $1,500 area holds. Leaving an optimistic medium term outlook, due to the Triangle break, and with a long term bullish bias while the $1,500 support holds. Gold, Daily Please click on the graph above to open a larger image Drilling down to the Daily chart we can see how following the sell-off through to May the price had rallied back to the February 2012 highs, a full 100% retracement.  Since then it has posted a bearish trading range, red region, and has once again moved back in to the retracement levels highlighted, red lines. The price has found some support off this area in recent weeks, and also has found support off the more medium term bullish trend line, lower black line. So for the moment the near term moves look to be a bullish near term leg within a bearish trading range, as a result risk/reward on buying here may not be that favourable. Moves back above $1690 would open up another full retracement  back to $1790. But we would want to see the current bearish trading range to be negated before turning more outright bullish. So in the near term gold has found support from major retracement and trend support areas, but it remains within a bearish phase. Moves through the $1715 area needed to create more definitive buy on strength signals, while any failure to break through the 1700-1710 area would be attractive for short sellers looking for the bearish range to continue. Contact Us For Spread Bet Sales:- 0044 (0) 207 894 8800 For CFD Sales/Traders:- 0044 (0) 207 894 8883 Email:- sales@cantorcapital.com Graphs Depending on your email settings the images contained in this note may not be downloaded correctly on the first viewing. To view a web version please click here, Web version. Graph images are created on Bloomberg, and remain under copyright to Bloomberg. 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