(Originally posted yesterday with appropriate charts)
Gold takes a breather, while negative data continues to pour in.
Gold’s inability to close above $1,300 is a mild hit for bulls, but prices will likely consolidate prior to the next leg higher. Prices declined to $1,280 per toz., just above the descending trend line, now support. The likely scenario is that gold will reenter the ascending channel and grind higher. Prices will look to regain $1,295, while a close below $1,273 will cause prices to push lower to $1,259 per toz.
The longer-term, monthly chart does look promising, however.
The price action in January has caused an overwhelming bullish monthly candle that trumps the previous two. Currently, price action is hung up around September’s close of $1,285 per toz, while price action resistance is found at $1,303. Gold has been able to recover from testing a longer-term ascending support trend line, but prices are still stuck within a descending channel created when the bull market correction first took place in 2013.
If prices can close above $1,303 then near-term resistance would be seen at $1,353; but, the next monthly target is found at $1,391.
There is accumulation of gold futures, which picked up since gold first bottomed at $1,130. Gold was overbought in regards to the near-term chart, and the easing off of $1,300 will correct that. The RSI is well from overbought, and it is ticking upward – a positive sign of more gains to come.
The +/- DMI is also looking promising. The negative price indicator (- DMI) has remained on top since the correction was first initiated, but it has recently given up ground. The + DMI is pushing higher, and a bullish convergence on the monthly chart could prove positive for that push beyond $1,353.
Definately value there. Looks like 80:1 is the sweet spot. Last year was like a liquidation sale. Lowered my cost basis by 5/oz.
Technician
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From a technical perspective, some nice bottoming price action is in place, also supporting your bullish bias ...
QuantitativeExhaustion
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Good trading Advice. Negative interest rates and low interest bonds is going to drive Gold / Silver back up. I'd rather take Silver given the Silver / Gold ratio.
CommoditiesTrader
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Thank you. And, who would of thought an asset that pays nothing would be preferred, right? Silver does offer value, but interestingly enough they offer different protection. Historically (past 50 years) gold has been more linked with rates, inflation, monetary policy, etc while silver is more of a play on the economy. Understandably, things are a bit messed up due to all the central bank interference. I'd own both with a slight overweight in what you may think the outcome will be in the next few years. I'd use the ratio as a means to allocate but not necessarily choose one over the other, but that's just me :D
QuantitativeExhaustion
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Assumptions are Europe's economy will now improve. They are of course taking the same actions as US, at least that's what is popular consensus. I too believe many major economies are weak, and doubt ECB QE will help much + possibility of Spain defecting later this year. So if all plays out and the consensus believes a stronger Europe, than Silver will be strong. So I'm still sticking with Silver over Gold.
arad700
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There are fundamental causes behind gold drop.As fundamentals haven't change, I can't see gold finding higher prices than 1340 USD.USA economy is pushing forward at a promising speed.Reports shown there is a surplus of gold.Russia will not be able to increase its gold stock.It means that demand is unlikely to climb the current levels.
CommoditiesTrader
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Russia is buying hand-over-fist, and I'm sorry if you think the U.S. economy is promising.
CommoditiesTrader
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Let the horrendous data flow continue. The US is nothing without the Fed, and the Fed will indeed reenter full-fledged QE by year end.
Nothing fundamental points to lower gold, really. You can either say "no inflation" or "deflation." The problem is, the majority look at it too simplistically. It's like saying low gas prices equal more consumer spending as we continue to see that's not the case (which I been saying for months now). Gold is a money equivalent and crusher of anything fiat. It is one of the prime financial assets.
arad700
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But historical data give credence to my theory.In my view, gold is unlikely to go through the roof of 1350 to 1400 USD. Furthermore, Commerce Department report shows personal spendig fell .3 percent, worse than expectation for the decline of .2 percent.Today, gold shed 7 percent . fundamentals are less supportive.
Gold Silver ratio