Breaking News

Gold Increases Due Weak Dollar And Technical Buying

By GoldTradingExperts.com CommoditiesNov 25, 2012 12:53AM ET
Gold Increases Due Weak Dollar And Technical Buying
By GoldTradingExperts.com   |  Nov 25, 2012 12:53AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Friday's gold price action may have surprised many gold traders who were expecting another quiet day as the US Thanksgiving weekend continued, but to us it provided a great example of converging factors having a major impact on the gold price.

Most people know that when the dollar weakens against other currencies, the price of gold tends to increase. This is simple economics - gold is priced in dollars and so when the dollar is worth less you get more bang for your buck, which in turn drives up the price of gold due to the increased demand.

Gold has been range-bound since early November, trading between $1700 and $1738. Since the end of last week gold has built a solid base between $1720 and $1730, but couldn't find the momentum to carry beyond the strong resistance around $1734-$1738. This price action resulted in an upwards triangle pattern and, in an upside break, when the price breaks out of the triangle it tends to go with some gusto.

The two charts below show both the euro and sterling putting in large gains against the dollar shortly after lunch yesterday.
Chart 1
Chart 1

Chart 2
Chart 2

It was no surprise then that, shortly afterwards, the gold price shot up to take out the resistance levels at $1738 (the upper limit of the trading range) and $1743 (the 50-day Moving Average).

As gold breached these key areas of resistance short stop losses and long buy orders would have been triggered, adding even more momentum to the upwards move.

Early next week, the focus will be back on Greece as eurozone leaders attempt to arrive at new debt targets for the stricken country before agreeing to release the next wave of bailout funds. An agreement is likely to underpin the euro and so add more of a boost to gold prices.

Later in the week eyes will turn to speeches by Fed members where traders will attempt to predict the likely outcomes of the next FOMC meeting on December 11th and 12th. This will be the first meeting since the US Presidential elections and investors will be watching the speeches next week to try to gain some insight into the Fed's plans as the "Operation Twist" program comes to an end in December.

We foresee a short period of consolidation for gold next week before a continuation of the rise towards $1800. There is resistance at $1785 and then again at the previous 2012 high of $1796.

On the downside, there is solid support $1720-$1715 and again at $1700.
Gold Increases Due Weak Dollar And Technical Buying

Related Articles

Gold Increases Due Weak Dollar And Technical Buying

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post also to:
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email