Gold can be a fun commodity to keep an eye on, as it can have some pretty volatile moves intraday. The price action we have been seeing in gold recently is a great example of why it’s important to be patient.
I’ve looked at gold a few times over the last year, for example in July when it was breaking out of a pennant pattern to the upside, back in September when the shiny metal looked like it might be topping out, and most recently in early January when it appeared that gold was reaching an oversold level near the $1640 area. But today what I’m seeing is the commodity is stuck between tight levels of resistance and support.
Gold looks like it’s in a quagmire, traders don’t seem to have enough conviction to have any type of substantial move. On the upside we have the 50-day moving average (green line) which we saw a false breakout above back in November before continuing the down trend and again in mid-January but buyers were batted down back near the lows. The 38.2% Fibonacci retracement level sits at $1676, which acted as a nice level of support back in early November but now is giving bulls some grieve.
On the downside we have the simple 200-day moving average (blue line). In January it doesn’t seem the 200-MA held very much significance as traders batted the price of gold around the moving average, however over the last week it appears to be the critical level for buyers to step in and hold. When we turn our attention to momentum we don’t seem to find much bias. The Relative Strength Index has found a home near 50 and neither bulls nor bears are able to push it in either direction.
Going forward patience will be a virtue. Unless your day trading the intraday moves of $gold or $GLD then it may make more sense to sit on your hands and wait and see how this battle of support and resistance plays out.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.
Well, I read the email, but I didn’t see the answer to the title on the story.
WHAT ARE THE THREE LEVELS TO WATCH? I can do without most of the chater. I hate it when I read something and come away thinking I have wasted my time.
Thanks for the comment. The levels I’m referring to are the 50 and 200 day moving averages as well as the Fibonacci retracement line that I reference and shown on the chart.
I am continually amazed how many clearly intelligent guys continue to use technical analysis to try and understand a market that is absolutely, without question, beyond any reasonable doubt, utterly and entirely manipulated!
Exactly Todd. Well said. It’s because it’s what they know. Can’t blame ’em. To believe TA is sending false signals would invalidate their metier. Heck, it’s invalidated MY metier and I’m not happy about it.
The tape is painted by JPM to make it look bad. They ain’t stupid. They know what analysts are looking at.
I’ve been watching the metals markets for 40+ years. I used to be able to trade pretty confidently based on technicals. I’ve done fabulously well. My only real mistakes, discounting the usual slight misfires on timing, were selling “too early.” This is across decades.
Now, the action is so clearly managed that I’m content to just take the artificially low prices, sit, wait, and ignore the game playing. The managers at the Fed and JPM, working as one, are giving us discounted metal in a time of rampant money creation.
You don’t have to be Jesse Livermore to figure out that if they’re trying to discourage people from holding the metals, those metals are the place to be.
All TA indicators give false signals at some point, nothing works 100% of the time. It’s learning and knowing how to handle those instances that separates those that are successful in using technical analysis.
Got that. For sure…more art than science.
And if what we’re seeing on the charts has almost nothing to do with the true forces of supply and demand, what then?
What if we aren’t talking about minor, temporary aberrations caused by an intervention or two, but concerted daily (or nearly daily) manipulation causing wholesale distortions over long periods of time to the point where the chart is more like the image from a fun house mirror than a photograph?
I would humbly suggest that if the gas gauge on your car were broken, you should stop relying on it. And if the market gauges are broken, you’d be well served to ignore them too.
Maybe you don’t think they are. Fine.
I do.
I’m not naive to the idea that large banks may intervene in ways they shouldn’t in certain markets but outside of what happened in silver with JPM I’m not privy to them being exposed in doing something illegal in gold.
Nor am I.
My suspicions/beliefs are based on inference.
And just one last point if I may. It isn’t what “happened” with JPM in silver. Wrong tense. It’s what’s happenING. They’re up to their eyeballs in silver … AND gold, shorting metal they don’t have and likely can’t get in massive amounts.
It’s nice to own the Fed, The CME, the CFTC, the DOJ, CNBC, and the politicians. You can get away with anything, especially when you trade at the pleasure…or is it the behest…of the Fed, which doesn’t want precious metals sending a signal that all is not well in moneyland.