Thank you to the sponsors below who make it possible for us to keep this blog running. Please check out their sites below:
1. Forex4you at http://www.forex4you.com/
2. ForexGuiden at http://www.forexguiden.no/
4. FXprimus – the best Forex Broker with the lowest spreads ever!
5.
*****************
6. Uploading.com – > Uploading.com is a leading service provider for secure file storage, transfer and sharing. Upload Files and earn money
Gold closed last Friday at USD 1348, after a lacklustre movement even though the US non-farm payrolls info came out. THV indicators show a bullish divergence on the 30 mins chart and I expect further movement north due to the unrest in the Middle East.
Now you are trade gold via the FXprimus Forex platform – Sign up here and include our referral ID 2085
Gold prices had been shielding themselves for a good jobs number with the unemployment rate expected to rise to 9.5% because more people entered the labor force while the private sector is expected to add 160,000 jobs. However, the U.S. economy added only 36,000 jobs and the unemployment rate dropped to 9%. Still, Wall Street seemed to shrug off the data which put some pressure on gold prices.
Digesting the jobs number is the least of investors’ worries. Gold prices popped 1.5% Thursday thanks largely to Ben Bernanke and Jean-Claude Trichet. Both central bank leaders reiterated their commitment to low interest rates despite acknowledging rising food and energy prices.
Although the headlines were nothing new, rumors had been circulating that Federal Reserve Chairman Bernanke would raise rates as the U.S. economy strengthened and European Central Bank President Trichet would also curb growth to fight inflation, which he particularly detests.
Trichet said he was more committed to growth than fighting higher prices for the short term, and Bernanke said that a recovery isn’t truly established until there is a long period of stronger job creation and that it would take years for the unemployment rate to dip below 6%. The commitment to low rates, underscored by today’s jobs number, was a green light for gold buyers.
Low rates and rising inflation equal negative real interest rates in which paper money is worth less. Typically, investors protect their wealth with gold.
Jon Nadler, senior analyst at Kitco.com, also blames short-covering and opportunistic fund buyers looking to buy gold at lower prices. If the majority of Thursday’s rally was technical, then traders could ditch gold just as fast as they bought it.
George Gero, senior vice president at RBC Capital Markets, also says any rally in gold this week was short covering. “But very interesting to note, gold futures open interest up 3,910,” which signals more long buyers in the market.
The sales of United States Mint’s American Gold Eage and American Silver Eagle bullion have soared in recent week. In the prior week ending February 2, 2011, the US Mint sold 1,748,000 ounces worth of Silver Eagles and 56,500 ounces of Gold Eagles. These are sizable increases from the prior week, when the pace of sales had slowed considerably.
Legendary investment guru Jim Rogers is still bullish on gold and says it is far from a bubble- his advice is to sell bonds and buy gold. Jim Rogers is of the view that gold prices would soar to unbelievable highs before it can fall.
First resistance is the 20-day moving average crossing at USD 1354.40 per ounce . Second resistance is the reaction high crossing at 1394.70. First support is last Friday’s low crossing at 1309.10. Second support is the 25% retracement level of the 2009-2010-rally crossing at 1307.10.
Gold has declined some $100 per ounce since its December 12, 2010 peak. Is this just a correction or could it turn into something more serious? Where is gold’s technically crucial support level?
Even the precious metal crowned to be the antidote to quantitative easing is subject to the market’s laws. Excessive optimism for an asset class rarely bodes well for its performance.
Just a few short months ago, Wall Street and Main Street expected gold to shoot through the roof. Ironically, as QE2 brought awareness to the U.S. debt ceiling, gold was repelled by the proverbial roof rather than shooting through it.
After three months of chopping around aimlessly, gold is trading at the same price today as in early October.
After a 10+ year rally that lifted prices from below $300 to above $1,400/oz, the yellow metal deserves some slack. The 7% correction since its December 12 peak hasn’t violated its uptrend yet. In fact, many analysts will tell you that gold’s pullback is healthy.
While a healthy break is constructive, gold running out of steam could be destructive to the wealth of many. How far would gold have to drop before the correction morphs into an unwelcome decline?
According to Richard Russell – a smart man and an avid gold bull – the SPDR Gold Shares (NYSEArca: GLD – News) has support at 114 – 122. A sell signal would be given if GLD hits the 128 box in the point & figure chart.
Using pivot points, a system that uses prior price action to identify future resistance levels, points towards 1,334 as support for the month of February.
I have to admit that I haven’t seen a profit opportunity in gold or silver (NYSEArca: SLV – News) for several months. To some degree that has spared me the headache of being caught up in the recent choppiness.
Via the ETF Profit Strategy Newsletter (January 14, 2011), a close below 1,360 would signal a sell. Thus far the signal has proven true, but there’s reason to be cautious.
By Simon Maierhofer