Monday, September 21, 2015

Gold Trend 22 Sep 2015


At the end of August when the Chinese devalued their currency and market volatility spiked higher, gold attracted buying. That buying took the yellow metal up to highs of $1169.80 on August 24, the day when volatility peaked. On that very day, crude oil made multi-year lows at $37.75 per barrel as did copper when it traded down to $2.2025 per pound. At that time, gold acted not as a commodity but as a barometer of fear. However, this time the Fed told us that the fear factor in the markets emanating from China are deflationary pressures. 
While gold, and other precious metals, attracted fear based buying late last week if we are looking at deflation the rally is by no means a lock in to higher price. I believe that the uptick in gold last week, was fear based buying once again and that things could get ugly for the precious metals sector if the world is facing a deflationary wave from the economic slowdown in the second biggest economy in the world, China.
The daily gold chart looks like recent trading patterns could lead one to believe that we are in the early stages of a rebound, as the price of gold appears to be making higher highs and higher lows since July. However, a look at longer-term gold charts has not yet given signal that gold has resumed the bull market.  

Gold daily price chart with support and resistance lines
Gold Short Term
Gold did exceed our 1115-1122 resistance late last week and once again got to the 1140 area.  If gold hold 1122 on a closing basis, the potential to return to the 1148-1158 area will be in play on the short term.  There is also potential support near 1126-1127 at the moving averages and that is what we would look for in a test on Monday/Tuesday.  Let’s see if we can hold there.  If we can, then a probe towards 1148 can take place.
Gold since 2015 high price chart with support and resistance lines
  
What Next?
Gold remains haphazard as it fights the fear buying but it is countered by the strong deflationary forces still in play.  We did close the week above 1122 last week so the potential of moving higher this week remains in play.  
Look for resistance to form at 1142-1158 and 1172-1182 if the rally does continue.  Pullbacks to the 1118-1127 should find initial support this week.  Additional support is 1103-1112.  


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M Samer Al Reifae
Official HiWayFX Representative in Romania 
http://lordoftruth.blogspot.com/
samer@hiwayfx.com
samer@hiwayfxglobal.com
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