Gold Chart of the Week

After completing a solid week of gains, the August Gold futures awaited the outcome of elections in Greece. Sunday night brought positive news early after the Greek vote was finalized, but the euphoria wore off quickly following news in Spain regarding high borrowing costs and bad loans that plague the future of the Spanish economy. Traders were buyers in most sectors early in the overnight session, then heavy sellers as we near the open of the US equity markets. The US Dollar and the Euro have already traded in very wide ranges over the last few hours.

Now that the Greek vote has passed, traders will look for clues this week from Los Cabos, Mexico where representatives from the G20 summit are in session to discuss the European issues that have affected the market so heavily over the last few months. Additionally, the US Fed will meet this week and deliver a policy statement that some traders hope will hint to some form of easing.

Gold traders that have defended long positions or added to their long positions last week are hoping for supportive language from the G20 Summit coupled with US Fed participation to keep Gold underpinned.



The chart above shows the daily chart of August Gold futures. I pointed out the Gold’s recovery last week after a two thirds retracement from the $1642 high. A good sign for Gold came three trading days ago when it closed above the overhead resistance trendline (in blue) that had been Gold Bugs nemesis for months. In early May and early June, the futures closed above the same line, but only for one day before sinking below again the very next day. Closing above this trendline for multiple days is a good start for technical traders that are bullish, but I believe they will be much more comfortable if prices can carve out a new high and close above $1642 an ounce.

I also pointed out that last night’s selloff ran into firm support at the same trendline that was once resistance. You can see that today’s low never broke the line and indicates that Gold prices are still poised to continue last week’s rally. Until the Gold prices close below this proverbial “line in the sand”, I believe traders will continue to hold long positions and or buy pullbacks. This will not be an easy trade for Gold buyers if the Euro maintains this type of weakness and drives the US Dollar higher, but this week’s news can provide the catalyst that will bring Sunday night’s early euphoria back to the trade.

Overall, I still believe that the market will see higher Gold prices throughout this year. My bias is based more on the fact that global economic woes coupled with massive amounts of new currencies being printed around the world, should provide “flight to safety” traders enough reasons to maintain bullish positions in Gold. On a day to day basis, especially over the next week or two, we should expect continued volatility as the world awaits very important global economic news. Once this news is final, I expect a more predictable trade.

Posted courtesy of Gold ETF Family member Brian Booth and INO.Com