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Today’s Trading Edge: Gold Could Fall to Triple Bottom Formation if Fed Hints at Higher Rates

Posted by Edward Moya on Sep 17, 2014 12:14:00 PM

WWM GOLD SEP 17 2014

Gold investors and pretty much everyone on Wall Street is eagerly anticipating the Fed outlook on future rate hikes.  The precious metal was once a favorite trade by many as it had an amazing bullish run from the 2001 low of $255 to the record high of $1,923.70 that was made in 2011.  With easy money propping up commodity prices, the gains plateaued once the Federal Reserve started tapering their asset purchases. 

With the recent strength U.S. dollar strength, lack of inflation, many commodity traders are ready to resume selling gold if the Fed shows that an interest-rate hike may occur early in 2015.  If the Fed signals that message this afternoon, gold may see accelerated selling pressure target the $1200 handle.  If they do not $1260 may provide strong resistance, critical resistance coming from the 200-day SMA at $1285.   

Price action on the daily chart shows that a potential descending triangle or triple bottom pattern may form.  If price does fall towards $1170, we may see a major collapse in the yellow metal target $1,110, which is the December 2013 low to 2014 high move’s 127.2% expansion level. 

The trade: Sell Gold at $1,245 with a stop loss at $1,265 and a take profit at $1,205.  The Risk/Reward Ratio is 1: 2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: gold, technical anlaysis, Federal Reserve monetary policy, Metals


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