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Bullish Outside Week Supports Gold Outlook

By Kira Brecht of Kitco News
Monday March 23, 2015 8:49 AM

(Kitco News) - Nearby Comex gold futures carved out a bullish outside week at last week's settlement, which is a positive weekly formation and suggests gold bulls are trying to stake out a near term low for the yellow metal.

A bullish outside week forms when the high and low of the week exceeds the previous week's range and a higher close is seen. That occurred last week, see Figure 1 below. The formation increases in technical significance when it develops near an important support floor. Gold formed the bullish outside week just ahead of key long-term supports from the November and December 2014 weekly lows.

Shifting out to the daily chart for April Comex gold futures, the market has climbed above the 20-day moving average for the first time since early February. The 20-day moving average at $1,178.30 now becomes support for the market. If gold can sustain strength above the 20-day moving average early in the week it will give the bulls confidence and keep the door open to additional upside probing.

On the upside, the $1,200 level stands as a psychological target and resistance and then more important swing high resistance lies at $1,223, the March 2 daily high. It would take a sustained rally and close above the $1,223 zone to break the recent daily downtrend pattern and to turn the intermediate term trend outlook back to the bullish camp for gold. The 40-day moving average also lies overhead and is resistance at $1,210.60.

In related market action, the U.S. dollar index is vulnerable to additional downside correction, following the recent multi-month rally move. Daily momentum indicators have turned down from overbought levels, which is a negative signal. If the 96.62 support floor gives way, the dollar will be susceptible to a deeper correction, which in turn could provide bullish support to gold.

By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht



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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