Gold: Now Looking At A Reversal

During the previous weekly review, we mentioned gold declining and hitting the $1180 target a few weeks earlier than previously forecast.

Reaching the $1180 target also represented a “triple bottom” technical pattern on the Daily timeframe, encouraging investors to enter the market. At first, I was apprehensive this would be a false breakout – mainly due to the expectation the Federal Reserve will conclude QE later in October. The US market-sell off during the previous week, alongside comments from the Federal Reserve’s James Bullard that the Fed may not actually conclude QE after all has changed my weariness towards a false breakout. With the right fundamentals connecting together, we could now be looking at Gold going on a bull run.

As mentioned above, the two major economic releases over the upcoming week involve Chinese GDP and US inflation for September. However, despite all the political/economic uncertainty taking place around the globe, gold has continued to trade only in accordance with US economic news. Therefore, investors in gold must keep an eye out for the United States inflation data.

If the inflation data heightens anticipation that the Federal Reserve will delay normalizing monetary policy and continue QE, there are high chances Gold will become very attractive to investors. Gold seems to have found some resistance around 1250 but if this is surpassed, resistance can be found at 1270 and 1290.

However if the CPI data is in line with forecasts, expectations will increase that the Fed will conclude QE as planned. This would encourage Gold to erase its recent gains, with support found at 1220 and 1204.

Both the Stochastic Oscillator and RSI are suggesting that gold could move in either direction.


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