The price of gold climbed higher Friday, closing above 1265 resistance after weak NFP print resulted to renewed speculation that the Fed will refrain from new tapered cuts so as not to jeopardize the fragile current rally further. The upward momentum continued today after freeing an initial bearish setbacks which tested 1,265 support level. At present, we are trading above the resistance in 1270 after pushing above the recent swing top 5 February, highlighting the strong bullish momentum, we are in right now.
Time Table
Perhaps more importantly, the price is trading above Friday's high was immediately after the NFP numbers were released. Gold was still a candidate to strong bullish rallies on weak NFP print, as risk appetite should decrease and therefore a safe haven like gold will be pushed higher. Even if the risk appetite actually won (which is actually what happened) because of stimulus paris, gold will earn the inflation risk becomes higher. the other stocks is not the same clarity, and as such, it is strange to see that gold failed to sustain the initial rally despite this clarity and ended up trading more low at the end of the hour after NFP was released. This is a huge testimony that there are many traders bearish on the prowl, trying to keep the price within the 1255 - consolidation area 1265. Therefore, by moving successfully beyond 1265, Friday's high now and 1270, it can be established that the bears have foiled a total of 4 attempts above is categorically banned in 1265, and the likelihood of a quick return to the consolidation channel becomes lower.
Daily chart
However, the work for the bulls is not completed on the daily chart. Price should delete the previous swing high of 1279.29 to demonstrate a strong bullish conviction that would invalidate the decline since the end of August 2013. However, even if this happened, stochastic readings suggest that the dynamics may be overbought and it becomes difficult to imagine gold being able to climb higher with resistance levels 0, 1300 and 1310 come in quick succession.
as such, we will need to see strong fundamental change in the current economic climate for an upward thrust sustained in the long term. This can take the form of a delivery status quo surprise by the new president of the Fed Yellen who is expected to speak to the House on Tuesday. This will be a make or break situation for the current gold rally, while prices are so high because of the stimulus speculation. Therefore, if Yellen suggests that there will be more tapered cuts to come in 2014, we could easily see gold give up all the gains made Friday. On the other hand, if there is a surprisingly accommodating policy by Yellen and it goes on to say that QE cone is pending, this may be the change in the economic climate that is needed to send gold higher on a long term basis.
Links:
Nikkei 225 - improved risk appetite alone is not enough for long-term gains
WTI Crude - High risk Pullback As fundamental reason for gains low
This article is only for general information purposes. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or its subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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