Europe is sputtering, concerns should be growing that U.S. growth may falter and ultra-low rates across all the advanced major economies may provide a backdrop for some bullish bets to jump back on gold. Gold prices are rallying despite U.S. dollar strength because safe-haven flows are growing.
Price action on the gold daily chart shows the recent rally is currently testing the 100-day Simple Moving Average (SMA). The precious metal’s bearish trend that extends back more than three years to the September 2011 record high of $1,923.70, appears to have stabilized. Price has now made a couple of key higher highs and a few higher lows.
If the financial markets are disappointed by the QE program that may be announced by the ECB at the January 22nd meeting, a decline in equities could halt the Fed from signaling a rate hike this summer.
If price has two consecutive daily candle closes above the $1,220, price may have a clear path towards $1,250, with further resistance coming from a potential Butterfly pattern at $1,290. If price breaks below $1,167, the longer-term downward trend may resume.
The trade: Buy Gold at $1,210 with a stop loss at $1,195 and a take profit at $1,240. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading