GOLD WEEKLY UPDATE

Long Term – Bullish – The key resistance area’s to regain upside momentum and potential new highs are 1792 and 1804.
Medium Term Bullish – – resistance 1755-1765 – support 1620-1648 and 1570.  NEED a close above 1715 to move out of the wedge and to go test 1755.
Intermediate term –Neutral/Bearish--- A close above 1715 gives bullish reading. THE SAR indicator on the weekly charts is still in a downtrend. A close below 1645 would favor a test of the lows at 1625.

Resistance for this week 1675-1685 2nd tier 1692-1705  
(above 1705 = 1715-1722)

Support for this week 1653-1663 2nd tier 1635-1642

Gold Daily Chart

Gold still remains caught in wedge formation and that wedge is nearing the end where the trend lines meet so something will have to give either way.  The 50 and 200 day averages are still for the most part defining the range in which gold trades.

 Interestingly the 50 day average is also at the top of the downtrend line and the 200 day average just a hair under the middle of the wedge at 1664.  That lower trend line hooks up all the lows from 2012 and the upper downtrend line hooks up all the highs from 2012.

You can bet that the technicians, hedge funds, commercial interests and the control boyz are watching both those lines as a fierce battle is growing inside that range for control of the next price trend that develops. We’ve got to make a move above or below these lines before we can establish a trend and we have to watch for fake outs at them.

Resistance will be the 200 day average at 1685-1692 and the upper line at 1705-1715.  A close above the upper line will favor the bulls are in charge and the uptrend will be favored to resume into mid February.  In summary, this wedge can continue to chop gold and it could remain inside this range again this week.  

The one thing that looks really good is the COT data on the chart below as the shorts have been drastically reduced short positions in gold.  This is yet another indication that is supporting the bulls as we enter into February. Quite frankly the only thing that makes the situation a questionable is the wedge in the chart above.  As you can see we’ve been bouncing around inside this wedge and neither side wants to lose the battle and so we have this back and forth shuffle that is going on.

What next?

Gold is stuck in a wedge between the 200 day average and the 50 day in the 1660-1695 area.  There have been a few probes below 1660 but so far gold doesn’t hang there long and makes its way back up over the 200 day. As long as we are inside the WEDGE gold can still move in either direction. Once we get out of this wedge, the next trend should be in play.

We got a 1651 price low last week and that new low might just be setting up for a February rally.

There are a lot of incidental things that seem to favor the upside as you'll read below.  But UNTIL WE EXIT THE WEDGE, the control boyz can keep toying with choppy action in both directions.  A wedge is probably one of the most frustrating patterns and the tighter the wedge gets, the choppier it can become as both bulls and bears are fighting for control of a medium term trend.

Bulllish items

Seasonal rallies in Feb have developed over the last four years and two of them started after a minor low at the end of January.  Gold short positions have   reduced to levels that are near where some nice rallies have developed in the past.  Not quite there but pretty close. With options expiration, the Fed meeting out of the way, and the NFP report not due for another month, along with rollover into April gold futures, and the Chinese New Year coming up, it would certainly be an opportune time for the gold bulls to make a stab at that upper trend line again this week and perhaps launch a seasonal move. 

The other item to keep in mind is that a lot of redemption from the Paulson funds might be behind us as the selling surely didn't help golds price in the last two months. 

Silver is stronger than gold and that is another plus when we see silver leading.  The commodity index is beginning to favor the upside as well. Watch Crude oil. If it breaks higher it should support the index.

While the drop to 1651 last week is a potential set up for a rally into the Chinese New Year, the one thing that is not yet lined up is the strong resistance that the price wedge has on the daily charts.  Wedges have a tendency to go back and forth from resistance to support and in the process exhaust everyone trying to jump aboard until they finally stand aside and then the move begins.

What is then that is keeping gold range bound and putting pressure on it?

Bearish items

Gold has been in a mode where its tendency is to rally when economic news coming out is weak.  We've seen the opposite as gold has been weak when there's good news on the economy. So are bonds and that market is close to breaking some important support levels. Certainly news that Bill Gross of bond giant PIMPCO is basically bearish bonds is not helping that market and adds to the bearish tone.

Thus while there are a lot of coincidental bullish overtones that could kick in place this coming week, the key will be for gold to conquer the 50 day average near 1695 and that downtrend line that defines the upper boundary of the wedge. No matter how many coincidental issues favor gold, those issues only count once a TREND is in play.   A close above 1705-1715 would favor higher prices in February and a test of the 1750-1760 area in gold.  No matter how bad things are on Main Street, as long as the media keeps spinning how good things are getting, it somehow ends up playing out for Wall street and lately, it has kept the pressure on gold.

One final thing.  When gold is in an uptrend and silver and platinum are rallying it definitely seems to make things click.  However, once in a while there's a short gold and long silver OR platinum trade that takes place and that is also an issue that could keep a lid on gold. 

 BOTTOM LINE

A WEDGE IS USUALLY A VERY FRUSTRATING PATTERN UNTIL IT BREAKS OUT

Gold has been stuck in a very tight trading range.  A lot of coincidental favor gold this week for the upside.  But price is the one and only thing that makes a difference. As long as we are inside the wedge, the chop can continue as wedges are basically where the bulls and bears fight for control of the next trend that develops and either side usually doesn’t give up easily. The bears will be waiting near the 1676-1686 area to defend the upside and the bulls in the 1650-1663 area. 

The bulls seem to have the advantage and we’ll favor them for at least an attempt to take out the downtrend line but until we come out of the wedge, the potential for risk and CHOPPY action with spikes down can and often do occur and the control boyz drop price just a bit lower than the last low or move price a bit higher than the last high inside the wedge and those with tight stops just keep getting taken out. It actually helps the wedge last longer. 

If the downtrend line is overcome it should bring a lot of momentum players and traders who have been on the sidelines.  Even then, anywhere near the wedge is always liable to throw a fake here and there. 

We’ll favor an attempt at the downtrend line in the 1675-1685 area and from there it will be whether the bears can hold the bulls.

If the bulls are to take command; this is the week most likely for them to make their move but the wedge rules when price is inside it.

We'd rather let price really break out once than do like most of the other websites and keep telling you ---THIS IS THE WEEK we're going to explode higher.  That doesn't help traders, investors or the analyst repeating it week after week.  All that does is add to the frustration and uncertainty for the gold longs.

The bull market is not over, but the trend hasn't turned back up yet and a WEDGE is unpredictable and the control boyz make it that way with swings all over the place.  If we get a breakout or break down, we'll cover it on the daily updates.

INVATA SA TRANZACTIONEZI GRATIS PIPSI IN FOREX

 YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS 
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. 

 Do your own due diligence. 

No one knows tomorrow's price or circumstance. 
 I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader. 
I do not accept responsibility for being incorrect in my speculations on market trend. 

 King Regards