Gold Unfazed Ahead of FOMC

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Gold started off very well in 2016 and as we approach the end of January, it has certainly performed much better compared to Silver. Price action in the yellow metal is very much technically oriented while the fundamental perspective has been supportive for higher prices.

We take a closer look at the possibility of further upside on the basis of the following:

  • Fundamentally strong and positioned for higher prices
  • CFTC report confirmed that Longs are building position and reducing Shorts
  • Signs of life in Gold ETF – SPDR seen some inflow (safe haven buying)
  • A higher low and higher high – perhaps its on its way for another higher high to $ 1130

To reach $ 1130, the short term recipes are:

  • Need a daily break and close above the weekly 100 ma which coincide with the daily 20 ma
  • A clean break and price acceptance above previous high
  • A dovish FOMC report this coming Wednesday and perhaps a size-able pullback in the US dollar strength

The risk to the downside may remain limited within the upward channel (see below):

  • Price action may continue to range trade for higher high and high low
  • Only a clean break out of the channel will indicate that the dominant bearish trend continues (bear flag confirmation)
  • Unless the FOMC statement veered to the Hawkish side, then downside is limited
  • Global equity is still in recovery mode but remain jittery

Gold Weekly

Gold Daily

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