FOREXYARD: Forex News Blog

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• Gold Slumps as Euro Strengthens
• Technical Update – Spot Gold Head and Shoulders Pattern
• Technicals Show Potential Pullback in Gold Prices
• Daily Decline in Spot Gold Continues
• Low Volatility Characterizes End of Year Trading
• Gold Prices Climbing Despite Year End Trading Conditions
• Gold Prices Falling as Year End Approaches
• Bearish Chart Pattern Hints at Reversal for Spot Gold
• Gold Prices Outperform
• Gold Testing All-Time High, Again
• Divergence Signals Sell for Spot Gold

Gold Slumps as Euro Strengthens Posted: 24 Jan 2011 01:56 PM PST The EUR/USD came off its highs during the US trading session but the pair continues to show considerable strength, hinting that the euro rally is not over quite yet. Spot gold prices fell to their lowest level in over two months following the completion of a head and shoulders reversal pattern. Near the end of the trading day, the EUR/USD was higher at 1.3640 after opening the day at 1.3593. The pair reached an intraday high of 1.3685. Spot gold prices were down sharply at $1334 from an opening day price of $1351. Spot crude oil prices were also sent lower, tumbling to $87.65 from $89.48. The Dow Jones Industrials Average moved higher to 11980.52 and is approaching the psychological 12000 level. In afternoon trading, the EUR/USD was receiving strong bids above the 1.36 level as traders continue to buy the17-nation currency as expectations for rising European interest rates increase. Progress on the fiscal front is also bolstering the euro as the European Financial Stability Fund (EFSF) is expected to issue its first round of bonds this week. A near term target for the EUR/USD may be the 61.8% Fib retracement level from the November to January downtrend. This price is located at 1.3745. Support looks to be the 100-day moving average line at 1.3540. Spot gold was down sharply on the day as traders have been quick to sell the commodity given the threat of further tightening of monetary policy in China and the potential for a rise in European interest rates. Traders should note the completion of a head and shoulders pattern on the spot gold daily chart. The left shoulder takes shape in mid-November with the head forming in early December at the all-time high of $1,431. The right shoulder formed in early January. A rising neckline can be found underneath the left and right shoulders. Estimating the price move from the reversal pattern brings a potential decline of $92 with a target at $1,265. This level coincides with the 61.8% Fibonacci retracement from the July low.

Technical Update – Spot Gold Head and Shoulders Pattern Posted: 20 Jan 2011 08:43 AM PST The daily chart for spot gold shows a head and shoulders top reversal pattern whose neckline was breached today, setting the stage for a potentially sharp drop in the value of spot gold. The left shoulder takes shape in mid-November with the head forming in early December at the all-time high of $1,431. The right shoulder formed in early January. A rising neckline can be found underneath the left and right shoulders. This line was breached earlier today following a selloff in spot gold. Estimating the price move from the reversal pattern brings a potential decline of $92. Measuring from today's breach of the neckline targets the mid-June high of $1,265. This level coincides with the 61.8% Fibonacci retracement from the July low.

Technicals Show Potential Pullback in Gold Prices Posted: 04 Jan 2011 06:18 AM PST Spot gold prices continue to climb but price stalled at a previous all-time high and the commodity looks to head lower. Following a failed breach of the resistance level at $1423 the price of spot gold as moved lower. Technicals on the daily chart point to a potential fall in the price of spot gold. Declining Momentum (7) will shortly provide a sell signal by dipping below the 100 level. Falling stochastics on the daily chart also support a decline in the price. Support for the pair is found at the mid-December low at $1361 followed by the rising short term trend line off of the October and November lows. Resistance is located at mid-December high at $1408, followed by the previous high at $1423, and finally at the all-time high at $1431.

Daily Decline in Spot Gold Continues Posted: 23 Dec 2010 06:40 AM PST Spot gold prices have fallen at the beginning of the New York trading session. The daily candlestick suggests more drops in the price may follow with support coming in at a short term trend line. Following the earlier drop in price during the European trading session, spot gold continues to fall as trading gets underway in New York. The price of spot gold is currently down at $1,375 from an opening day price of $1,387. Further declines in the price may occur as today's candlestick is taking the shape of a shaved head which indicates bearishness in the commodity. Support for spot gold is found at a rising short term trend line off of the late November and December lows. Today the support comes in at $1,365. Resistance is found at the mid-December high at $1,392.

Low Volatility Characterizes End of Year Trading Posted: 23 Dec 2010 02:37 AM PST Gold prices were relatively unchanged yesterday as the commodity traded in a tight range. Yesterday's trading had low volatility and light volume that characterizes end of year trading. The price of spot gold fell marginally to $1,387.36 after opening the day at $1,389.31. During yesterday's trading price movements were subdued with little volatility as the price of spot gold moved between an $8 price range. The 20-day Average True Range is more than twice that at 17. Many traders are attempting to balance their funds and taking risk off the table as the New Year approaches, booking gains in the commodity that is up more than 25% this year. The open interest in the number of Comex gold future contracts has dropped to 582, 133 lots from 650,764 in early November. The movement in the dollar has also limited the volatility of gold prices. The EUR/USD traded in a tight range yesterday, closing down at 1.3112 after opening the day at 1.3133. Gold prices often take direction from the dollar's movement as a stronger USD makes gold prices more expensive for those traders who do not hold dollars. Volatility may pick up this afternoon with the release of US Core Durable Goods Orders as well as weekly unemployment claims. Both are scheduled for release at 13:30 GMT. US New Home Sales are also due out at 15:00 GMT. Better than expected numbers may strengthen the dollar and in turn traders may bid the price of spot gold lower. The next support level rests at a rising support line that comes in today at $1,364.

Gold Prices Climbing Despite Year End Trading Conditions Posted: 22 Dec 2010 03:31 AM PST Commodities rose yesterday and continued to rise in European trading today. Spot gold prices moved higher as the euro fell due to European sovereign debt concerns. Spot gold prices increased yesterday and finished the day higher at $1389.31 after opening the day at 1386.00. This was the second consecutive day of gains for the commodity. Yesterday's trading had low volatility and light volume that characterizes end of year trading. However, the negative string of news surrounding Europe may be helping to support the price of spot gold as traders look for safe haven assets. This may increase the price of spot gold despite year-end profit taking. Since last week, Europe has been the target of the ratings firms. Threats to lower the sovereign debt ratings of Belgium, France, Portugal, and Greece have taken their toll on the market. On Friday Moody's Investor Services downgraded the credit rating of Ireland. Yesterday Moody's announced the sovereign debt rating of Portugal may suffer a downgrade and will be announced in the first quarter of the New Year. Today Fitch Ratings announced its intention to examine Greece's credit rating following the political and economic events the country has undergone. Despite the fiscal difficulties Europe faces, the weaker euro may have in fact prevented a sharper rise in the value of gold. As the dollar strengthens, the price of gold becomes more expensive to those investors who hold currencies other than the greenback, thereby reducing the demand non US investors may have for gold. Should euro zone troubles continue, we may expect further appreciation in the price of spot gold with the next target the all-time high at $1,431.00.

Gold Prices Falling as Year End Approaches Posted: 20 Dec 2010 03:01 AM PST As the year comes to an end, spot gold prices are down the past two weeks as traders and institutional investors take profit on long positions in the commodity that has appreciated over 25% this year alone. Over the past two weeks the price of gold has fallen from an all-time high of $1431.00 to $1371.05, for a decline of almost $60 or 4.1%. The declines may be worrisome to traders as a two week decline in the price of gold may have pushed many short term traders out of the market. However, long term instructional traders may be in a better position to absorb a 4% decline in the price as the price declines barely put a dent in the uptrend when looking at the longer time frames such as the weekly and monthly charts. Can the recent declines in the price of spot gold be attributed to end of year profit taking on a commodity that is up 26% the year? Looking back, it is not surprising the rise in the price of spot gold. What is surprising is the extent of the gains. An environment with ultra-low interest rates may have sparked long term inflation fears, driving traders into what George Soros called, "The ultimate asset bubble." Despite repeated calls for declines in the price of spot gold that did not occur from analysts, economists, and traders alike, what conditions would make for an environment suitable to falling gold prices? It is fair to assume that this asset bubble may pop when global interest rates begin to rise and inflation expectations are subdued. However, when looking at the monetary policy of the larger developed economies; the US continues to employ loose monetary policy with just last month announcing measures to increase liquidity with a second quantitative easing program. The ECB would like to raise interest rates but doing so could drive the European fiscal crisis deeper in some financially troubled countries. Japan is fighting deflation and is in no position to raise rates. China on the other hand has begun tightening monetary policy. This could be the first sign that the global economy is beginning to make a change in its stance on inflation which could influence global inflation expectations.

Bearish Chart Pattern Hints at Reversal for Spot Gold Posted: 30 Nov 2010 12:33 AM PST The appearance of a head and shoulders reversal pattern provides technical evidence to sell. Other long tern technical indicators support this hypothesis. The daily chart for spot gold trading displays the formation of a bearish head and shoulders pattern. This reversal pattern may signal a top in the intermediate uptrend that spans from a low in July to a high in November. Going to the chart, the head and shoulders are clearly defined with the left shoulder taking shape on 10/14, the head is located at 11/9, and the right shoulder at 11/23. A break below the rising neck line would signal a completion of the chart pattern. By measuring the height of the neckline we can estimate a potential move of $100 from the breach below the neck line. Further evidence of a bearish move in the price of spot gold can be found when looking to the long term time frame. The November candlestick on the monthly chart appears set to end on a doji candlestick. This is a bearish signal for spot gold and supports the hypothesis of a price reversal. The monthly chart also shows technical divergence in the Momentum oscillator. In December 2009 the Momentum indicator registered a high of 151 on a new high in the price. However, the next peak in June 2010 fell to 140 despite a new record high in the price. We may expect the November number to also fall which would provide further evidence of divergence thus supporting a drop on the price. Given the bearish chart pattern and the accompanying negative signals from the monthly chart the uptrend appears to be weakening on a technical basis. A sell would be recommended upon a break below the neckline from the head and shoulders pattern with a take profit level near the rising trend line on the daily chart. The trend line rises off the lows of February, March, and July.

Gold Prices Outperform Posted: 27 Sep 2010 08:12 AM PDT The price of spot gold continues to rise, moving closer to the psychological level of $1,300 as the dollar falls out of favor. During the European trading session on Monday, spot gold prices held close to their all-time high, trading at $1,200, from an opening day price of $1,2981. The price continues to be buoyed by overall dollar weakening that intensified following last week's announcement by the Federal Reserve. The release of the Federal Reserve Open Market Committee meeting minutes declared the Fed's willingness to enact further quantitative easing measures to help stimulate the US economy. The chance of further quantitative easing was increased on Friday in a speech by Fed Chairman Ben Bernanke. The Fed chief noted the effort to reduce unemployment has been significant. Despite the lengths the Fed's has gone to, the quantitative easing has not reduced rising US unemployment numbers. Last month the US unemployment rate rose to 9.6% from 9.5%. The easing of monetary policies in the US has been a major contributor to the rise in the price of spot gold. As a steady stream of dollars continue to increase in the markets, inflation fears are rising given the lack of commitment by central bankers to reduce the amount of dollars available. As the dollar continues to fall out of favor with traders, market players have looked to other instruments to act as safe havens such as the Swiss franc and the Japanese yen. However, none of these instruments are able to keep up with the strong appreciation that has been seen in the price of spot gold. Gold prices are up over 400% since 2001. Looking at the weekly chart, since the price of spot gold rose from the $685 resistance level in October of 2008; the price is up 90%. A rising trend line follows the rise in the price. The price of spot gold has made a push above its previous high at $1,265 (S1) and reached a new all-time high last week, trading at $1,299. The next support level falls at the July low at $1,156 (S2). $1,300 should act as the next resistance level because it is a big round number that traders tend to focus on and therefore set their limit orders near this level. Should the $1,300 price level be breached, traders will want to target the $1,400 level for spot gold prices.

Gold Testing All-Time High, Again Posted: 01 Sep 2010 03:41 AM PDT Spot gold prices have surged and are closing in on their all-time high. Negative risk sentiment surrounding the recovery of the global economy and renewed inflation fears have caused traders to once again begin to bid the price of gold higher. The price of spot gold yesterday up at $1,246.75, after opening the day at $1,236.75. Spot gold prices have climbed off of their lows of $1,156. The rebound in the price comes as fears of a double dip recession and slowing global economic growth are weighing on the market, influencing traders to buy gold as a safe haven asset. Negative fundamentals from the US housing sector may be influencing traders. A lack of confidence and spending has ensued since the US government ended the subsidies it enacted to support the lagging housing sector. Yesterday's release of the Federal Reserve Open Market Committee (FOMC) meeting minutes provided an insight into the Fed's thought. The Fed voted 9-1 to keep the Fed's balance sheet at its current level by purchasing treasuries as the MBS that the Fed hold on its books expire. Dissent was voiced during the 2 days meeting as many FOMC members felt deflation was not an issue. However, they did express their views that higher inflation could return if the Fed did not drain the excess liquidity from the money supply. Other factors that may be moving the price of spot gold higher are heavier trade volumes as traders return to their trading desks from the summer holidays. Also wedding season in India during the fall months typically spurs an uptick in the demand for gold. Turning to the weekly chart, a rising trend line begins at the end of September of 2009 with the price making 3 points of contact with the trend line. This indicates this is a significant trend line. Momentum points to a price move higher as the Momentum (7) is sloping higher. The all-time high of $1,265 looks to be in range with support appearing at $1,224, (S1) followed by $1,156 (S2).

Divergence Signals Sell for Spot Gold Posted: 29 Jul 2010 04:55 AM PDT A sharp price decline of 8% in the price of spot gold over the past month may have created a short term buying opportunity in the commodity, but divergence on the weekly chart shows a sign that the long term trend is failing. Multiple signs that the long term trend is weakening are coming from both the weekly chart and the daily. Following yesterday’s disappointing U.S. core durable goods orders, the price of spot gold rose to $1165.60 after opening the day at $1163.45. The commodity fell to a low on the day to $1156.25. Following this price action, the end result was a hanging man candlestick that could signal a rally in the price of spot gold if the commodity can breach above the $1169 resistance level. A short term boost in the price could be to the resistance at $1186. The weekly chart of spot gold shows the commodity has breached below the long term trend line that began in October of 2008. A weekly close below the line would confirm the breach of the trend, providing a shift in the long term trend of the commodity. At the time the price hit a record high price at $1265, an evening doji star candlestick pattern formed, a warning that the long term bullish trend is changing. Confirmation of the pattern came the next week with the long red candlestick. Supporting the downward move is a doji candlestick that formed the following week after the evening star pattern. But what stands out most for the weekly chart is the divergence that is appearing on the slow stochastic oscillator. Divergence occurs when prices reach a new peak but an indicator fails to reach a new peak. When the price of spot gold reached a new high on June 21st, the slow stochastic oscillator rose to a new high. But shortly after when the price rose to a new all time high, the slow stochastic oscillator did not make a new high. This shows divergence in the price of the commodity and the oscillator, signaling that the trend is weakening. Divergence for the slow stochastic provides a strong sell signal in preparation for an oncoming drop in the price of a commodity, perhaps more powerful than the crossing of the stochastic lines. This is yet another tool in a trader’s tool chest that allows one to identify potential tops and bottoms in trending markets.

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