INTERMEDIATE TERM TREND BEARISH/NEUTRAL
SHORT TERM TREND BEARISH
VERY SHORT TERM TREND BEARISH
In our last update, we said we thought the consolidation had a little bit more to go and were looking for a test of the 1780-90 area at the beginning of December in an ideal scenario. This level coincides with the 200 day Moving Average, and is also previous resistance from early summer 2020, meaning it is now an area of strong support.
Since then, gold has fallen to the bottom boundary of the complex consolidation pattern that has been in place since August and is in danger of breaking to the downside. This is just what we would like to see for a sell off down to our target over the next couple of weeks.
On a shorter time scale, gold attempted to rally after last Tuesday’s dramatic $100 sell off on the news of a COVID-19 vaccine being announced by Pfizer, however it was only able to rally feebly to the 1900 area before encountering resistance and selling off again. We are still watching strong support at 1850 as the key area. A break of this support is likely to see a sharp sell off towards our target of 1780-90.
Gold is now trading below the 50 day Moving Average, currently at 1901, and the 89 day Moving Average, currently at 1922. These levels provide resistance in the short term. The price remains above the 200 day Moving Average which as noted above is currently at 1792.
Equities continue to surge higher, fuelled by unprecedented amounts of financial stimulus and liquidity and record low interest rates and continue to make all time highs on a regular basis. Since jumping initially on the vaccine news, equities have pulled back a little but remain within striking distance of all time highs, particularly as further good news on vaccines is now emerging on a regular basis.
The Dow is currently at 29,320, just 2.5% below the all time high of 30,093, and the S&P 500 is currently at 3,562, just 3% below the all time high of 3,674 set on Tuesday.
Following equities, oil sold off sharply in the first quarter of 2020, at one point trading into negative territory. Prices have recovered strongly since then and are now trading at around $42 a barrel with a strong bullish bias on the charts. We expect oil prices to recover further over the coming months, our initial target is $50 in the short term.
In gold, support can be found at 1848-50, 1830, 1817 and 1780. The recent wedge consolidation pattern is bullish for gold in the medium term time frame and suggests a move towards 2,100 early next year is becoming more likely.
Short term resistance can be found at 1884, 1888-90, 1900, 1909, 1917, 1922, 1932, 1965, 2000, 2016 and 2077. Gold needs to break the key resistance level around 1965 to give the bulls some renewed momentum and a move back towards the all time highs above 2000.