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Gold Market Analysis

The April gold contract managed a slight rise in the wake of the LTRO results and that suggests the trade was attempting to embrace a risk on mentality. The bull camp might suggest that the liquidity move provides the gold market with fresh support and the flow of scheduled data from the US today might quickly take control over gold prices. Economic news from the Euro zone overnight was a little soft, with some German readings a little discouraging and Indian growth readings falling to the weakest levels in nearly 3 years overnight. Gold might still be drafting some support from news yesterday from an Iranian central bank official, who suggested that Iran was planning to accept gold in exchange for some sanctioned activities. However, holding back gold prices somewhat overnight was talk that Indian February gold imports might have softened considerably from year ago levels. Some traders might suggest that slightly higher oil prices today is being seen as a limiting development, especially with the euro failing to gain traction off the LTRO action. However, US equities are showing some positive early action and that helped the metals complex initially show some positive across the board action in the early Wednesday US trade action. Gold continues to be a physical commodity market in need of growth hopes and therefore the level of the US GDP reading this morning and the Chicago PMI report later on, will probably need to hint at a positive progression in the economy for gold to push into even higher ground on the charts. Comex Gold Stocks were 11.427 million ounces up 96 ounces. Stocks have declined 12 of the last 20 days. While the bias is pointing upward in gold to start today, the problem for the bull camp might be a lack of definitive upward momentum. In fact, gold seems to be encountering a small wave of back and fill action in the wake of the LTRO results and that has to be discouraging to those who expected another risk-on wave of buying this morning. Since US scheduled data isn’t exactly ultra critical news today, it is possible that the gold market will waffle around both sides of unchanged until the Fed Chairman dialogue is released and or the US stock market provides some fresh leadership. Therefore an initial dip down to $1,778 in April gold is possible with a further slide to $1,774.80 possible in the event that the LTRO really fails to inspire physical commodity market buyers this morning. We get a sense that a buy the rumor, sell the fact event has taken place with the LTRO and it will be up to the US equity markets to save the gold bulls in the Wednesday US
trade.

Technical Analysis

COMEX GOLD (APR): Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The close above the 9-day moving average is a positive short-term indicator for trend. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 1809.1.
The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1799.8 and 1809.1, while 1st support hits today at 1774.2 and below there at 1757.8.

 

StockMarketNews Research Team 

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