Short term Bullishness for the Gold Price Continues
Commodities / Gold and Silver 2010 Mar 22, 2010 - 06:33 AM GMTBy: Miles_Banner
Gold rallied to a high of 1133.3 last week but fell sharply by Friday’s close. A reverse head and shoulder pattern has emerged that forecasts a short term bullish trend for the gold price…
Last week the dollar rally continued to find strength as leading EU member officials, one by one, questioned what the EU’s response to the Greek problem should be.
The gold price charts in different currencies reflect an unanswered question of how to handle the Greek conundrum.
Last week Jose Manuel Barroso, the European Commission president, called for an agreement to be reached by EU governments over a financial standby emergency facility for Greece…
The German finance minister, Wolfgang Schauble, announced on Friday he still has ‘strong reservations’ about a possible EU bailout. And Nicolas Sarkozy, the French president, is also said to be uncertain.
On Thursday the EU’s 27 government officials will meet in Brussels. At this meeting George Papandreou, Greece’s prime minister, has said he will look for a clear statement on how the EU will help Greece should they request financial help.
Over the week the Euro dropped 1.8 percent against the dollar and 0.8 percent against the pound.
The late dollar rally
Supported by the dollar index’s 200 day moving average turning up, a late rally in the dollar over Thursday and Friday last week gave signs of a possible subsequent upleg. Fears are, once again, driving investors to the safe haven of the dollar.
The past few weeks have confirmed the old dollar – gold inverse relationship. If the dollar continues to rise in the short term this spells a likely fall for the gold price.
The gold price reverse head and shoulders
If we look at the gold price over the last few weeks we can see a reverse head and shoulders forming – this is a bullish sign for the gold price which, if played out according to theory, should see a downside correction to around 1050. (left shoulder: 1130.90, head: 1114.80, right shoulder: 1113.20).
Thursday’s meeting will be watched closely to see what assurances the EU will give to Greece. In the face of uncertainty gold’s long term outlook remains bullish. Especially if the printing presses are put into action again which is still a possibility especially as deflationary fears creep into the market. It’s not just the doomsayers looking down the road and fearing hyperinflation. Depending on how the Greek currency conundrum is handled, gold remains on course to reach new highs in the long term. But short term it’s a time to hold on to your seat belt as the roller coaster ride continues.
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