Gold continues to carry a bullish bias towards the three-month highs around the $1,250 resistance region that was established last October. Last week, I targeted a bullish rally towards $1,240 and since hitting that level yesterday, price has come back towards the $1,225 area.
The bullish bias is likely continue as the financial markets prepare for the ECB to launch their QE program. Today, the European Court of Justice announce they are on board with the OMT program. Gold prices could continue despite U.S. dollar strength because safe-haven flows are growing for the precious metal.
Price action on the gold daily chart shows the recent rally has taken off since closing above 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 is now steadily making key higher highs and significant higher lows. If price has two consecutive daily candle closes above the $1,250, price may have a clear path towards the $1,280 - $1,290 region, which could also form a potential Butterfly. A daily close below $1,170 would invalidate this current bullish stance.
The trade: Buy Gold at $1,235 with a stop loss at $1,228 and a take profit at $1,249. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading