Spot gold is testing support at $1600/ounce, but the primary trend remains upward. Expect a rally to the declining trendline. Breakout above $1700 would indicate the correction is weakening, while failure of support would test $1500*.
* Target calculation: 1700 – ( 1900 – 1700 ) = 1500
Amex Gold Bugs Index, representing un-hedged gold stocks, is testing primary support at 500. Failure of support would warn of a reversal in the primary trend and would be a bearish sign for spot metal prices.
Spot Gold is testing support at its initial target of $1600/ounce. The long tail is evidence of buying support, but failure would test $1500. The primary trend direction remains up and, despite gold experiencing a strong correction, is unlikely to change.
* Target calculation: 1750 – ( 1900 – 1750 ) = 1600
Brent crude is testing support at $104/barrel while Nymex WTI crude is at $80/barrel. There is no sign of the divergence between the two grades closing. Both have signaled a primary down-trend, though Brent has yet to confirm with a break of its rising trendline.
* Target calculation: 105 – ( 120 – 105 ) = 90
Exchange operator CME Group Inc. will raise the collateral requirements for trading in gold, copper and silver futures after a volatile week.
Gold margins will be raised by 21%, silver margins by 16%, and copper margins by 18%, effective at the close of trading Monday, CME said in an email after trading closed Friday.
via CME Raises Gold, Silver, Copper Margin Requirements – WSJ.com.
Spot gold broke support at $1700/ounce, falling hard to $1650. The calculated target is $1600* or $1500 depending on whether you take the base of the double top as $1750 or $1700.
* Target calculation: 1750 – ( 1900 – 1750 ) = 1600
When you look at the trend channel on the weekly chart, however, it is likely that the sharp correction will overshoot the trend channel on the lower side. Possibly as low as $1300*.
* Target calculation: 1500 – ( 1900 – 1700 ) = 1300
I have to eat my words from September 11: “With Europe awash with stories of the imminent default of Greece, and German banks told to prepare for a 50% haircut on Greek bonds, this would be a good time to buy gold.” Sure I qualified by warning that below $1800 all bets were off, but should have placed more emphasis on the overbought situation on the weekly chart and less on the approaching European tsunami.
Amex Gold Bugs Index gapped through the rising trendline and support at 600, warning of a bull trap. The Gold Bugs Index represents unhedged gold miners. Spot gold support at $1700/ounce is now likely to fail.
Buyers appear to be losing interest and spot gold is headed for a test of the key $1750 support level. Failure would complete a double top, warning of a correction to $1500/$1600* (depending on whether you take the base as $1700 or $1750). Respect would indicate another test of $1900.
* Target calculation: 1900 + (1900 – 1750 ) = 2050 and 1750 – (1900 – 1750 ) = 1600
Softening of gold prices from the “stronger” dollar is being offset by demand for gold as a safe haven from the looming euro-zone crisis. Respect of support at 1750 would indicate another test of $1900; confirmed if spot recovers above $1830. The pattern remains bullish at present, but breakout below $1750 would warn of a double top and correction to $1500/$1600* (depending on whether you take the base as $1700 or $1750).
* Target calculation: 1900 + (1900 – 1750 ) = 2050 and 1750 – (1900 – 1750 ) = 1600
Gold miners such as AMEX Gold Bugs Index ($HUI) continue to test support after their recent breakout. Failure of support at 600 would warn of a bull trap and weaker spot prices.
* Target calculation: 600 + ( 600 – 500 ) = 700
As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.
via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.
When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).
Spot gold penetrated short-term support at $1800/ounce and is testing the medium-term level at $1750. Compare the two declines in the current triangle/consolidation, however, and buying pressure (accumulation) is evident. It took two days for price to fall to $1750 during August, with two strong red candles one below the other. On the second downward leg, candle bodies often overlap and it has taken more than two weeks to reach the same target. Recovery above $1830 would signal another test of $1900 and confirm the bullish ascending triangle. Failure of support at $1750, however, would complete a double top, warning of a correction to $1600*.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100 and 1750 – ( 1900 – 1750 ) = 1600
A false break below $1800/ounce indicates buying support at the rising trendline. Breakout above $1900 would complete an ascending triangle with a target of $2100*. Reversal below Friday’s low would warn that the pattern has failed and correction to the long-term trendline (around $1500) is likely.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100
The long-term chart below gives a clearer picture of the current bull-trend. Spot prices spiked up 20% in a matter of days after the collapse of Lehman (LEH), but declined back to $700/ounce within a few weeks. The up-trend only started in November 2008, when the Fed announced that it would purchase mortgage-backed securities and Treasurys in an attempt to lower long-term interest rates (QE). The trend accelerated in 2011, several months after commencement of QE2. While collapse of Lehman was the underlying cause, the bull-trend is a reaction to the Fed response of quantitative easing. Further purchases of Treasurys or MBS would lift demand for gold. Hopefully Wednesday’s FOMC announcement will provide more clarity as to the Fed’s intentions.
