Tuesday September 28, 2010 - 00:42:41 GMT
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Gold Developing Two Scenarios
December Gold had an inside day on Monday indicating
developing volatility and slowing down the pace of the recent rally. The swing
chart indicates that $1318.10 is the next upside target on October 4, but the
Gann angle formation is indicating something else.
Based on the current short-term range of 1237.90 to 1301.60,
there may be a correction back to 1269.75 to 1262.25 before this market moves
higher. In addition, the market may stop on an uptrending Gann angle at
What traders have to remember is that trades back into the
Gann angle or retracement zone will not necessarily negate the uptrend, but
could serve as buying opportunities. Like any other investment vehicle,
investors want value. In this case, Gold may have become too expensive. In
addition, weak traders have to be forced out to set up the next buying
This morning a news report was released stating that Europeâ€™s central banks have all but halted sales of their
gold reserves. This ended a run of large sales each year for more than
The recent rush into gold over the past few weeks may have
been in anticipation of this event. What it essentially means is that a
significant source of supply has been withdrawn from the market. In addition,
it has given psychological support to the gold price. In other words, supply
will be tight and a major seller is gone.
Traders may not react to this news instantly because it may
have already been factored into the market, but it will play a significant role
during the next financial crisis. Gold is likely to continue to move higher
especially if the central banks turn into buyers.
Based on the technical and fundamental patterns I remain
biased to the upside, but will be willing to wait for a correction into a value
The December Euro posted a closing price reversal top on
Monday after Moodyâ€™s Investors Service said it cut Anglo Irish Bankâ€™s
unguaranteed senior debt to Baa3 from A3, and cut its dated subordinated debt
to Caa1 from Ba1.
The chart pattern suggests a possible top, but the pace of
the break from the top may be hindered by lingering concerns that the U.S.
Federal Reserve will engage in quantitative easing.
Technically, I had been anticipating a possible top or at
the least a technical bounce once the Euro reached the 50% price level of the
main 1.1876 to 1.5144 range at 1.3510. The current rally reached 1.3507 before
sellers stepped in.
If confirmed by at break through 1.3424, the Euro may begin
a correction back to 50% of the 1.2644 to 1.3507 range. This price is 1.3075.
The technical pattern is clear, but in order for this to
come to fruition, it needs the cooperation of a couple of fundamental factors.
Sovereign debt concerns are likely to be a bearish driving force, but this news
could be negated by bullish economic news from the Euro Zone or more bearish
economic news from the U.S.
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