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Short-Term Technical Picture Improving As Gold Continues Recent Rebound

By Allen Sykora of Kitco News
Tuesday November 18, 2014 11:17 AM

(Kitco News) - Gold’s action in the past two weeks bodes well for the metal in the short term, at least, analysts said.

The metal was able to reclaim a key failed technical-chart support level, post two significant Friday reversals higher and move above the 10- and 20-day moving averages. Based on that, one analyst said the charts hint that “the worst of the sell-off is behind us,” while another said gold seems to be trying to “carve out some type of meaningful bottom.”

So far Tuesday, gold for December delivery traded as high as $1,204.10 an ounce on the Comex division of the New York Mercantile Exchange, before paring its gains. At the session high, the contract was up $73.70, or 6.5%, since the Nov. 7 bottom of $1,130.40.

Further, gold was back above the roughly $1,180 area that traders had talked about for weeks as key support before it failed on Halloween. Based on a futures continuation chart, the market held right around here twice during 2013 – in June and December – and the level then became a triple-bottom when prices bounced from near there again last month.

“It looks right now we have established at least a secondary uptrend on the weekly charts,” said Darin Newsom, technical analyst with DTN. “We did post a (longtime) low a couple of weeks ago and we have rallied off of that.”

In fact, he said, on a longer-term monthly chart, “one could almost argue” that the sharp decline followed by a spike higher “could also turn that trend up.”

He added, “we have a lot of previous trading to get through between $1,180 and let’s call it $1,430 – somewhere e in that range.” The $1,430 area is roughly the high in gold since it originally held around $1,180 in June 2013.

“It’s possible we hang in that area quite a while,” Newsom said. “But it does look like the worst of the sell-off is behind us now and this market may want to try to go up.”

Charles Nedoss, senior account executive with LaSalle Futures Group, said technical buying is occurring after the past two Fridays were “outside days” and gold again closed back above its 10-day moving average. A key level on the charts now, he continued, will be whether gold can remain above the 20-day average.

The first “outside” day came Nov. 7 when gold broke below the prior day’s low but then reversed course and closed well above the prior day’s high. The market then consolidated within the Nov. 7 range for the next four trading sessions.

“Then last Friday, we had another outside day,” Nedoss said. “We took out the prior day’s low and the prior day’s high and closed higher on the day, but more significantly, we finally closed above the 10-day moving average. That’s a pretty good technical sign.”

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Around mid-morning, the 10-day average was down at $1,166.50, with gold more than $25 above this. Further, as of when Nedoss spoke to Kitco News, gold also was above its 20-day moving average of $1,188.20. A key will be whether the metal finishes the session above this, Nedoss said.

“With the 10-day (average) hooking up, us following through on two outside days…and now if we are able to close above the 20-day moving average, to me that’s technical signs of strength,” Nedoss said.

“Also, that $1,180 area was a key. It didn’t hold and we washed out under that. But remember, prior support is going to be current resistance. Now, we’re starting to blow through that level and we’ve got a couple of closes back above that. It’s kind of a sloppy bottom; I’d like to see more of a rounded bottom. But with the outside day, it looks like gold is really attempting to carve out some type of meaningful bottom.”

By Allen Sykora of Kitco News; asykora@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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