XULF Report
Fed Reserve Chairman Ben Bernanke’s comments caused extra volatility last night and eventually forced gold lower as it became clear Bernanke was intent on reducing stimulus if economic data showed improvements in the next few weeks. The FOMC’s meeting minutes also revealed that a number of officials were keen to taper the programme as early as June which now tips the power in favour of the hawks. There are many who believe that a diminishing stimulus programme will be bad for gold however do bear in mind any correction in equity markets should lead to fund managers switching more money to commodities to diversify which would benefit gold to some extent and maybe provide some support.
The market is certainly volatile at the moment and this can be illustrated on the 1 hour chart that shows how price has failed to develop any sustainable trend over the last 3 days. However a range is establishing itself, ignoring last night’s false breakout, from around $1354 to $1400 very similar to the sideways range that formed in the first week of May. Ranges can present opportunities for bounce trades at the support and resistance levels but candlestick information must be considered before trying such strategy. Bear in mind a bounce is more probably than a breakout if there is a substantial amount of time elapsed since the previous test of support/resistance. Also a bounce need not necessarily occur precisely on support/resistance. A shorter term opportunity could be when the $1370 neckline is complete for the double bottom that could yield an incline a few dollars. Another test of support around $1354 within the next 48 hours could lead to more declines and draw towards April’s low of $1321. There’s quite a lot of reports due out today to be aware of including Eurozone manufacturing and services PMI, US Jobless Claims and New Home Sales so trade carefully around these numbers.
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