Gold rebounds a taper perception are muted
Gold prices have recovered some of their recent loses and are poised to perform better as the dollar weakens. The statement and question and answer session on Wednesday by Federeal Reserve Chairman Ben Bernanke was accommodative in nature allowing the dollar to ease and gold prices to gain traction. Hedge funds seemed to have edged back into the gold futures market providing a base for the yellow metal.
US 10-year yields received some relief on Wednesday and Thursday on the heels of Ben Bernanke’s statement post the FOMC’s meeting. As yields declined to 2.53%, the dollar eased allowing gold prices to gain traction.
Gold also received a boost increasing activity from hedge funds. According to the most recent commitment of traders report released by the CFTC for the period ending July 2, 2013, managed money increased long positions in gold futures by 4K contracts while increasing short positions by 1K contracts.
The technical picture for gold prices is turning the corner. Gold has been able to stabilize near support at 1,180 and 1,200 and is poised to take a run at 1,321. Short term support is seen near the 10-day moving average near 1,250.
Momentum on gold prices seems to be accelerating as the MACD generated a buy signal at the beginning of the week. This occurs when the differential between the 12-day moving average and the 26-day moving average crosses the 9-day moving average of the differential. The index has moved from negative territory to positive territory confirming the buy signal. The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels, is printing near 46 which is on the low end of the neutral range, and can continue to move higher with price action.
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