Gold Technical Analysis

Wednesday, June 19, 2013, Marketing Communication Gold, Weekly The Weekly graph on gold details how the metal posted a consolidation phase from H2 2011 through to Q1 2013. It also details how this support was breached in April 2013 causing a number of market participants to liquidate their holdings. The selloff has been significant enough to pull prices down under the 38.2% retracement level. The stochastic in recent weeks has moved to heavily oversold areas. The oversold levels in late 2011 and 2012 held at 25, and were followed by a recovery in price. The issue on the recent oversold levels, down to 12 on this graph, is that stochastic overbought and oversold levels can themselves be used to signal changes in trend. In that during a bullish trend ‘oversold' conditions occur around the 30-20 region, in bearish markets however the oversold conditions occur lower, 10-20. So oversold conditions should not be seen as a constant. The stochastic has now moved down to stochastic bearish trend oversold levels, under 20, suggesting that the bullish trend from 2008 has now turned, following the consolidation in 2012 to more outright negativity in Q2 2013. It is unlikely that the bull market confidence in gold will return while prices stay under the 2012 support around 1525, which now is expected to act as significant resistance. Leaving a bearish bias while prices stay under 1525. Gold, Daily On the daily chart we see the sell-off in April in more detail, the price attempted to test the break of support in late April, only for the selling to once again gain the upper hand. The bulls will attempt to gain some confidence from the higher lows posted in recent weeks, lower black line. While the lower highs in recent weeks has formed the current congestion pattern, black lines. Over this timescale the stochastic has been gaining with higher lows, but also has posted lower highs, matching the coiling nature of the price action. The coiling phase is set to resolve in the coming days. The resultant move could be quite sharp so traders will need to monitor positions closely. Due to the oversold conditions on the weekly chart a rally of some kind seems the more likely outcome, but as mentioned on the Weekly chart above, we would not expect the buying momentum to be too significant as we would expect strong resistance to emerge on any move up towards 1525. CFD Sales/Traders 0044 (0) 207 894 8883 cfdsales@cantor.com Equity Spread Bet Sales 0044 (0) 207 894 8800 sales@cantorcapital.com Graphs Graph images are created on Bloomberg, and remain under copyright to Bloomberg. Depending on your email settings the images contained in this note may not be downloaded correctly on the first viewing. 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