Gold continued in its range bound pattern again this week, with another week of very low volume trading. This is likely to continue for another week or two – as is just about everything else, the gold market is seasonal and many traders sit on the sidelines during the summer doldrums, not wanting to get caught out by the strange and seemingly random price moves that a thinly traded market can sometimes throw up.
The thing we all know with sideways action is that it eventually has to breakout – gold has reached that point and over the next few weeks it has to break out of the $100 range it’s traded in since the start of June.
Earlier this week gold dipped beneath the $1600 level after poor economic news from China – China is the second largest buyer of gold as people invest in the yellow metal to offset inflation concerns. With inflation worries dampened, the demand for gold drops. The strong support around the $1580-$1590 level held firm though and soon gold was back above $1600 as comments from Angela Merkel gave support to Mario Draghi’s crisis fighting strategy for the Euro.
Traders are now waiting to see what happens with the Fed at the end of this month. Any indication that QE3 is imminent will send prices beyond the strong resistance at $1630 and a breakout will ensue.
The thing we all know with sideways action is that it eventually has to breakout – gold has reached that point and over the next few weeks it has to break out of the $100 range it’s traded in since the start of June.
Earlier this week gold dipped beneath the $1600 level after poor economic news from China – China is the second largest buyer of gold as people invest in the yellow metal to offset inflation concerns. With inflation worries dampened, the demand for gold drops. The strong support around the $1580-$1590 level held firm though and soon gold was back above $1600 as comments from Angela Merkel gave support to Mario Draghi’s crisis fighting strategy for the Euro.
Traders are now waiting to see what happens with the Fed at the end of this month. Any indication that QE3 is imminent will send prices beyond the strong resistance at $1630 and a breakout will ensue.
As we’ve been saying for many weeks now, there are clear opportunities both north and south beyond key support and resistance levels. To the north there is resistance at $1630, $1660 and $1690-$1700…after that there is a clear run up to $1800. Our feeling is that a bullish move is the more likely of the two at the moment. This view is shared by some real heavyweights as billionaire fund managers George Soros and John Paulson heavily invested in gold. With his increased stake, 44% of Paulson’s $24 billion fund is exposed to gold so he clearly believes that the price is due to rise.
Below us there will be support around $1580, $1560 and $1525 – if that lower level gives way; our view is that the price is going MUCH lower and probably pretty quickly.
At the moment we’re just waiting and watching to see what happens. Our success has come from picking up on strong movements and getting a good slice of the action – right now there’s not much of that about. But that’s ok…patience and disciple have always been the key to success.
Below us there will be support around $1580, $1560 and $1525 – if that lower level gives way; our view is that the price is going MUCH lower and probably pretty quickly.
At the moment we’re just waiting and watching to see what happens. Our success has come from picking up on strong movements and getting a good slice of the action – right now there’s not much of that about. But that’s ok…patience and disciple have always been the key to success.