XULF Report
Equity benchmark indices are making regular new highs whilst gold is holding onto gains made since the sharp drop in April although it feels like we need an alteration in fundamentals before gold can either push and test $1500 or break below support at $1440. Presently the main thing that is supporting gold is uncertainty emanating from Europe, slowdown concerns in China and mixed economic data from the US but on the whole investors believe consumer demand is suffice for corporates to deliver future earnings growth. This results in the majority of funds flowing to equities rather than commodities pulling gold back from further medium term gains.
Chinese CPI released this morning was higher than the previous month and higher than the consensus forecast which, along with yesterday’s trade data, will have alleviated slowdown worries. This evening’s economic schedule includes the Bank of Englands rate announcement and US Weekly Jobless Claims.
The 4 hour chart shows how gold is firmly back trading within the $1440 to $1485 range since hitting the $1440 support Tuesday evening and a break out either side could lead substantial declines or rallies. The hanging man candlestick signals this short term rally is losing momentum and the yellow 20 period MA recently crossing below the red 50 MA indicates a decline is probable. A bearish candlestick following the hanging man strengthens the bearish case. Other factors favouring the bearish side for the rest of the week is price is trading towards the top end of the range and now the Reserve Bank of Austrailia has joined the increasingly loose policy club of central banks there isn’t much else likely to push gold higher for the next few sessions. Pull the trigger for the short play if the candle after the hanging man is bearish and target $1459 which is 50% Fib Retracement Level
On the contrary the 30 minute chart is more bullish showing triangle and constricting bollinger bands. If a breakout occurs and price pushes up past $1486 resistance then $1500 is the short term target.
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