It's a good time to take a look at some technical analysis of gold using some of the most trusted principles of analyzing price charts.
As we hit the middle of October, gold has tested and broken through a key Fibonacci retracement level at $1,170.80 an ounce. Spot gold has been building a bullish triangle since October 2, as chances for an interest rate hike by the Fed dim amid signs of economic slowdown across the globe.
If spot gold closes today above $1,171, we may see some consolidation at this level as prices build support, before testing major resistance at $1,189. Breaking through the 61.8% Fibonacci line at $1,170.80 will be a big psychological boost to the bulls if it holds. $1,160 is the new support level.
Interpreting the Data
This rally has been built on weakness in the dollar, which in turn is being pressured by expectations that the Federal Reserve will not hike interest rates until next spring. Continued weakness in the global economy, and signs of disinflation at the wholesale level in the U.S. are serving to reinforce the perception that the Fed's hands are tied, at least in the short term.
Some analysts are predicting a medium-term advance to the $1,200-$1,220 mark if conditions remain the same, but profit-taking by investors who bought in at the $1,150-$1,155 level will increase if current prices stand. Forecasting gold prices beyond the immediate horizon is dangerous, since everything depends on the actions of the Fed.
Keep in mind that any technical analysis of gold is meant only to reveal certain patterns in price movements and market sentiment or behavior—not to be construed as professional investment advice!
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.