General profit taking and cautiousness from deliberating bulls created a new range for gold of $1276 to $1390 for the most part of yesterday. Gold did show signs of beginning another downward leg approaching Friday’s low of $1269.51 but the bears kept encountering demand in the $1275 to $80 region. In the equity world a broad scale risk-off sentiment emerged after reports that China’s tightening credit conditions are beginning to take the toll on developers and manufacturers as money market rates are currently double the average for the year. This combined with the realisation the Fed is ready to begin tapering if the US economy continues to improve is bringing the widely anticipated correction for stocks.
My weekly analysis yesterday predicted a small bounce for gold after Friday printed a harami and the RSI returned from oversold however this play seems to be losing its appeal as it fails to hold ground in the $1290’s. Due to the lower highs visible on the 1 hour chart since Friday’s rally to $1302 the short term outlook is now more bearish. Bears should consider shorting if price spikes to the resistance area displayed by the green rectangle or when price moves below the support area of $1269.50 to $1275.
Now it has dawned on investors that the Fed is poised to act this week’s economic numbers will be as important as ever as the market awaits evidence to put the Fed’s exit plan into action. Tonight we have the US Durable Goods Orders, New Home Sales and Consumer Confidence which could force gold lower out of this interim range.
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