Gold Report 15th April
Gold Report 15th April
Reports of Cyprus selling their gold reserves and recent cuts to gold price forecasts have been the main catalysts for this huge sell-off for the precious metal. Gold seemed to fall off the cliff at $1558 around 17:00 on Friday and hasn’t looked back since notwithstanding surprisingly poor US Retail Sales and Consumer Sentiment and disappointing Chinese GDP. An unloading of 400 million Euros of gold reserves does not in itself represent an amount to cause the extent of the recent decline, however, this Cyprus sale has sparked fears that other highly indebted peripheral Eurozone nations will follow suit leading to many investors unwinding large positions. In general gold is losing its lustre amid economic growth and low inflation but there is sure to be some bargain hunters at these levels of $1448 plus many longs who missed their chance to sell may wait for a pullback before unwinding again.
No doubt the short play is the trade to look for in the current environment but a pullback trade is possible for the impatient market participants. A typical signal for the retracement trade is a bullish hammer that has recently printed on the 15 minute but do be wary and tread carefully as there have been false bullish hammer signals before. Also the RSI is still below the 30 level therefore waiting for more evidence of a pullback such as a higher low is advisable before taking a risk and buying.
The daily chart illustrates the huge drop for gold and price is currently trading well below the lower Bollinger band. Given the severity of the decline an imminent and proportional bounce back is unlikely therefore expect gold to develop a new trading range of between $1450 and $1480 for a while as the market stabilizes. Investors need to be glued to their computer screens this week whilst having gold exposure as one third of the Dow Jones components are scheduled to release earnings.
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