XULF Report
Gold made an attempt to test resistance at $1400 last Thursday and has since been trapped in a range of $1382 to $1398. This indecision of gold’s next move is ascribed to the conflicting data and expectations of the effects of a diminishing monetary stimulus programme in the US, Japan’s resolute quantitative easing plan and its volatile impact on the bond market and the outcome of a slowdown in Chinese growth that seems to have been accepted by China’s President as a necessity to cool down its property market. All this information can have opposing effects on gold’s future direction which is why we are seeing tightly ranged trading for the last few days.
The 1 hour chart encapsulates the equal split between the bulls and the bears since Thursday as the red support and resistance lines show the $1382 to $1398 range. The Bollinger bands constriction and the ATR at $4 highlights the lower volatility since this range has established itself which are good conditions for a breakout. Another test of $1398 to $1401 should result in a breakthrough as this level has been tested 6 times now within the last week. There was a temporary break of caused by Ben Bernanke’s comments but for the purposes of chart analysis I will ignore this but be aware it could provide resistance at $1414 if a breakout does occur so this could be a feasible target level. If price fails to penetrate resistance we could see a breakout to the downside with $1381 being a possible short entry level and targeting the lower levels of the bigger range of $1354 to $1400. A breakout of this tight $16/$18 range should dictate the movement over this week so be poised to trade the breakout.
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