Is gold at a reflection point?


 The price of gold this afternoon remains slightly lower by 0.43% or -$6.00 to $1,381.60 as gold traders remain on the sidelines ahead of the Federal Reserve policy meeting and statement this Wednesday.

Image courtesy Luftbildfotograf: Gold has been range bound since mid-May trapped both by the fundamentals and technicals which looks to be coming to a point of price breaking out.

On the fundamental side gold prices are put under pressure when the Federal Reserve Bank of New York reported General Business Conditions jumped to 7.8 for June compared to negative reading for May of 1.4.  Expectations were for an improvement to -0.5 for June.

As a result in improving fundamentals speculation in the gold market of the Federal Reserve beginning its big unwinding of the QE1 - Q3 is pushing gold lower.

You can look at a gold chart and see the effects of the continuing changing speculation view of the Federal Reserve's talk of tapering coupled with good economic news.

Looking at the daily chart of gold and we find a technical picture lining up with the fundamentals.  The price action in gold has been range bound pushing price into a wedge pattern suggesting a break move is nearing.  In fact when drawing the trendlines of the two lines involved in the pattern we find about two more days before the end of the pattern….hmm right in time for the Fed statement.

Providing strength to a downside move is the current Fibonacci wave is to the downside with a .50 retracement in which price moved between the .382 retracement and the "B" side of the swing and consolidated since.  Further suggesting a bearish tone in gold is price well below the 150 and 200 day moving averages as well as the bottom side of the T3 Tilson.

Bottom Line: Volume in the gold has been tapering off the last 5 trading sessions as wait for the Fed statement even furthering suggesting price is coiling - possibly waiting for the Fed statement.

Those looking to setup breakout entry point on either side of the pattern in the equities markets rather the futures can use the SPDR Gold Trust (GLD, quote) ETF.  The GLD options now also come in mini option contracts for those looking to reduce risk even further.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , International , Stocks

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