Gold Develops Minor Short Term BottomBy Kira Brecht
Monday June 08, 2015 09:55
(Kitco News) - Gold is consolidating at modestly firmer levels on Monday. A minor bottom has formed on the intraday charts, which could act as a short-term floor. The larger trend on a multi-month basis remains neutral within a very large range.
A look at the daily chart, seen in Figure 1 below, shows Comex August gold is nearing the lower end of the large multi-month range, with major support floors seen at the March low around $1,143 and then the November 2014 low around $1,135. Longer-term physical buying interest emerged on dips to those zones in recent months.
Drilling down to an hourly chart picture, the yellow metal formed a "hammer" bottom on the candlestick charts at the $1,162.10 per ounce level and that zone is now strong short-term support for the gold market. See Figure 2 below.
Daily Bollinger Band lines (shown in blue) narrowed in recent hours and the lower line offers support at $1,169.80 on Monday morning. The sell-off to the $1,162.10 low represented an "extreme" move outside the lower daily Bollinger Band line and the market bounced back in a reversion-to-the-mean type of move.
In the short-term, the $1,162 support floor will be key to near term direction. If gold can form a base above that zone it would open the door for sideways to higher trade. Resistance lies at $1,177-$1,178 and gold bulls would need to generate momentum for a rally and close above that zone to confirm a short-term bottom and open the door for a minor rally move.
For the very short-term, strong support lies at $1,162 and strong resistance comes in at $1,178. If declines are achieved under $1,162 it would leave gold vulnerable to a test of the March or November low.