Gold Slowly but Surely Making its Way to a Touchdown!

Gold manages to grab two first downs, but is a touchdown in sight or are we going to have to settle for a field goal?

Well if you read my last blog on technical indicators, then you would understand what I mean by the title of this article. Gold has proven itself quite the strong team by getting two "1st downs" when it crossed upwards past the $1,619 resistance line AND the 200 day moving average on the XAU/USD pair (Gold-to-USD).

Currently, we have some grueling slow-paced, but stable, upwards trending action as gold approaches the $1,677 resistance line:

I'm going to call this a touchdown if gold passes the $1,677 resistance "end zone," but if it hangs around that level for too long, we may just have to settle for a "field goal," which translates to somewhat of a minor correction (as in a temporary dip) or a minor ranging (as in slightly up-and-down or just plain sideways) pattern before resuming forth with a new bullish "possession."

As I mentioned before, often times a prior resistance line will operate as future support should price move up past it - and that goes for major moving average lines as well. In the above chart, you might notice that 2 of the last 3 candle sticks (the first and the third/last one), have their lows just barely sitting above the blue 200 day moving average - this is good. It tells me that gold price is getting 'carried' by that line and hence remaining ABOVE it.

The oscillators tell a slightly different story, but overall somewhat good. The MACD (blue) line has crossed the signal (red) line long ago, but it has just recently crossed the 0.00 mark and into positive territory while the signal line is only approaching that mark. This tells me that there is still plenty of room for upwards movement before we start getting into 'overbought' territory. The RSI is a little less optimistic as IT claims that we are already a little overbought (approaching 60), but historically, this indicator has needed to hit 65-to-70 before offering any kind of strong indication of a reversal to the downside. All-in-all, I would say that the support and resistance levels and moving average line are depicting somewhat of a slowing but stable bull (I'd say roughly a 45% vote for 'up'), while the oscillators are giving gold a little room to breathe for the time being (about a 33% vote against it) - leaving me with a mindset of 12% voting up against 0% voting down.

Fundamentally, Patton Fischer recently mentioned that gold was still grabbing the bull by its horns thanks to 'good' news coming out of Europe's IMF and despite counteracting good news from U.S. statistical reports. I suppose one could say that both my technicals and the news fundamentals are giving a teeny tiny bit of positive support to gold rising in the near term, but again, given the fact that these are 'teeny tiny,' they probably won't do much more than help me sleep a little better this weekend. But let's see some great plays next week!

Remember, technical charts are not maps that pinpoint exactly where prices will be, they are more like archaic GPS devices accurate to within a mile...

- Gerald

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