Jalatama Loco London (XULF) Report 28/05/2013

XULF Report

Gold continues to be stuck in the $1382 to $1400 range building the pressure for a substantial breakout whenever that may occur. The bulls have attempted to test $1400 several times now but the wall of resistance seems to be too thick as there are minor resistances from $1397 to $1401 collectively building a very strong defence line for the bears. China’s Premier comments regarding the huge challenges his country faces amid slowing growth is another potential black cloud hanging over the equity rally causing investors to pause for breath and keep most markets range bound. It really feels like gold needs something to push its way out of this range, either to the upside or downside, as it has become clear the bulls need some impetus to push through $1400 whilst they are being too stubborn to step aside and let the bears win. That impetus could emanate from the US Consumer Confidence tonight at 10pm. A disappointing result should spark an equity sell-off and force gold up through $1400. On the contrary a good number is likely to cause the opposite effect and drop gold lower. The improving housing market in the US has increased consumer net wealth and showed signs of increases in consumer confidence and spending therefore the market will be eagerly anticipating more evidence of this.

From a technical perspective the setting is more bullish than bearish but this all depends on an upside breakout through $1400. The daily chart shows how the medium term bearish trend has lost momentum displayed by the lower pain momentum indicator that has broken its own trendline and price has now formed into an ascending triangle. This triangle pattern will have little value unless price breaks the upper side at $1400 but if it does it could yield significant price appreciation over the medium term. Do bear in mind that this ascending triangle isn’t in perfect set-up conditions as the usual set-up is for it to appear during a bull market however they can still produce good results in or after bear markets too. The market is likely to stay quiet until US Consumer Confidence tonight and if the result is a considerable difference to forecasts this could be the turning point for gold.