GOLD TODAY – Gold sets new 5 year low

Otmane El Rhazi from The Bullion Desk.

Short Term: Medium Term: Long Term: Resistances: R1 1,157 7 DMA R2 1,158 DTL R3 1,162 June low R4 1,170 May low Support: S1 1,155 Long-term 61.8% Fibo S2 1,147 July low S3 1,144 Lower BB S4 1,085 March 2010 low S5 1,074 January 2010 low S6 1,044 February 2010 low Stochastics: Legend: BB = Bollinger band  U/DTL = up/down trend line MACD = Moving average convergence/divergence H&S = Head-and-shoulders formation DMA – Daily moving average Technical Comment Analysis Gold has broken out the November low at $1,131, which had been supporting prices; it is now testing support above the March 2010 low at $1,085. The stochastics, MACD and momentum are all heading lower signalling sustained downside strength.  The price continues to trade below the lower BB at $1,131 reflecting a strong downtrend.  Macro drivers China has updated their official holdings for the first time in 6 years to 1,658 tonnes, an increase of 604 tonnes. Markets have taken this as a bearish indication as China had been believed to be more active in the physical market.  Janet Yellen, the Fed Chair, has signalled to markets that the FOMC believes that it will be appropriate to raise rates this year. This is bolstering the dollar – placing downside weight on precious metals.  The COTR net long position has decreased by 2,624 contracts, driven by 2,762 lots of long liquidation reflecting reduced upside confidence.  Gold ETFs have set a new 2015 low.  Gold remains out of favour but the recent rout in Chinese equities could trigger physical gold purchases should Chinese investors return to their traditional store of wealth. Conclusion Gold has broken out to the downside, setting a new 5 year low as several of its supporting fundamental factors have turned bearish.  It is now testing support above the March 2010 low, the long-lower tail indicating reduced selling above this level.  Following the strong sell-off, gold may require a period of consolidation whilst it ‘catches its breath’.  We will look for a renewed downside push to re-test the March 2001 low to signal sustained selling strength. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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