The polar vortex is definitely hurting the economic recovery in North America and as concerns grow that the Federal Reserve may slow down the tapering of its asset purchases, investors have once again fallen in love with bullish bets on gold. After yesterday’s disappointing retail sales and jobless claims numbers, gold was able to climb above the $1,300 handle. This is the first time in 3 months that the precious metal is above this key figure and momentum investors may drive price towards $1,380.
Gold (daily chart) is currently breaking out above the 200-day Simple Moving Average (SMA) and invalidating a potential bearish Gartley pattern. Often times when a bearish reversal pattern is invalidated, price may see a major rally that will target the next major resistance level. Since forming a double bottom with last year's June to December lows, price has rallied above the key 50.0% Fibonacci retracement level of the $1,434 to $1,186 move. Immediate resistance will come from the 61.8% Fibonacci number at $1,339.30 with further upside targeting the $1,380 level. To the downside, the 200-Day SMA which is currently trading at $1,307 will be key support.
The trade: Buy Gold at $1,314 with a stop loss at $1,305 and a take profit at $1,339. The Risk/Reward Ratio is 1 : 2.4
Edward J. Moya
WorldWideMarkets Online Trading