Gold Technical Analysis

Tuesday, January 29, 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 highs above $1,900 posted late last 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. Over the Weekly timescale things are a little more interesting, on this graph we have thrown up a potential Elliot Wave Count. Elliot Waves can at times offer extremely attractive risk/reward forecasts, but due to the numerous ways any graph can be described with Elliott Waves we tend to stick with only the most basic of wave counts and stay away from the more complex wave formations. The moves from the 2008 lows do appear to be an impulse leg higher, from an ABC correction. Wave 3 of this impulse itself sub divides into an impulse wave, red letters, and the recent much publicised descending triangle pattern, red lines, could be described as a simple ABC correction. From this bullish leg. As a result a simplistic Elliot Count is seeing the recent price action as Waves 1 & 2 in a larger bullish leg higher. In order to negate this optimistic view Gold needs to drop back under the 2012 lows at 1500. As mentioned above Elliott Waves counts can be ambiguous, however interpretations from them are not, so while the count above is only one version it does help add some importance to the 2012 lows around $1500. In summary then the medium term confidence looks set to remain strong while this key support area 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, after a negative RSI divergence was posted, yellow lines. The recent price action has found some support the 50% area calculated from this move, and also has found support off the more medium term bullish trend line, lower black line. So in the near term gold has found support from major retracement and trend support areas, but it remains within a bearish phase, red region. Moves through the $1700 area needed to create more definitive buy on strength signals, while any failure to hold above the 50% level, and the medium term support, could quickly see losses down to the lower retracement zone and back down to the January lows. Current levels could be attractive for the short term buyers, expecting the 50% level to hold, with initial targets at $1700, but due to the bearish trend this would be attempting to forecast the end of the near term trading range, The more straightforward trade is to wait until the price moves to an extreme of this current trend. Then either buying on the strength that would occur on a break higher, or simply sell into the strength expecting the bearish trend to continue. Leaving a trading buy seen tempting for the active, while the more steadfast are expected to stand aside for now and buying on any strength through $1700. 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