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The Technical Alignment of Gold

Commodities / Gold & Silver 2009 Nov 06, 2009 - 08:55 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleThe Macro Trader’s view:
Gold rallied hard on Tuesday and again on Wednesday, after India announced it had purchased $6.9B worth of Gold Bullion from the IMF, approximately half of the IMF’s annual sales.


But why does it matter whether or not India chose to buy Gold from the IMF? Although the sum is significant it is a small percentage of India’s reserve holdings, which like most other countries, is mainly denominated in US Dollars.

However, the deal is significant because China also recently announced it had been buying gold over recent years. China has been a critic of the US Dollar as the World’s sole reserve currency. So these purchases mark a decision by two of the World’s largest and fast developing economies to begin diversifying their reserves away from the Dollar.

The Technical Trader’s view:


DAILY CHART

On the Market Update of 5th October ‘How High Can Gold Go?’ We presented this chart.

It shows the Gold price just about to break above a Neckline

We were excited because a Head and Shoulders Continuation pattern was just about to be completed.

As a result we felt the bulls were in charge:  medium and long term.

From that H&S pattern and various Fibonacci extensions, we were able to build a series of medium and long-term targets for Gold at 1106, 1210, and 1330.

Now look closer. 

DAILY CHART

What happened?

On the 5th October the market had just broken back through the Neckline of the massive H&S pattern.

The market surged ahead in the very short-term and then ground to a halt at the Pivotal Prior high at 1060.

The pull-back found support at the prior High at 1025.

The bounce from that level has driven the market up through the 1060 again – in a typical ratchet-like fashion for a well structured bull trend. 1072 (Prior High) is now good short-term support.

Short, medium and long-term structures are all in alignment.

So we are keen bulls.

 

Mark Sturdy
Philip Allwright

Seven Days Ahead
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Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2009 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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