Kira McCaffrey Brecht: “Technical Trading: Gold Remains Supported By Geopolitical Worries” – Kitco

Posted on :Sep 03, 2013

By: Kira McCaffrey Brecht


September 3, 2013

Financial  markets remain jittery and nervous regarding events over Syria as the U.S.  Congress will soon begin its debate over military action against Syria. Gold  saw brief traditional safe-haven buying on early morning news reports that  Russia’s early warning system detected two missiles were launched in the  Mediterranean. News reports remain limited regarding the origin of the  missiles.

Technically, the initial reaction in the gold  market to the news reveals that the yellow metal is likely to retain a bid as  the geopolitical uncertainty remains at high levels this week. Crude oil  futures also saw a strong bounce from overnight lows on the initial reports,  but have since eased off like gold.

Technically, December Comex gold futures remain  in a daily uptrend, off the June 28 low. A rising bull trendline can be drawn  off the late June and early August lows, which reveals support well below the  market around the $1,331.60 zone. See Figure 1 below.

Daily momentum has turned lower from overbought  territory. The 9-day relative strength index (RSI), a widely watched momentum  indicator has tumbled to the 61% area early on Tuesday, falling from last  week’s 81% reading. Any reading over 70% is considered overbought and the  modest price pullback to the overnight low at $1,373.60 has allowed the market  to work off that overbought status. However, for now, the indicator remains  negatively positioned, which could allow for modest additional downside testing  short-term.

Support comes in at the August 20 swing low at  $1,351.60. See point A on Figure 1. That zone represents the previous swing low  and needs to hold on downside tests to keep the recent uptrend pattern intact.  With the uncertainty surrounding Syria and potential military action, however,  dips in gold are likely to be short-lived and used as buying spots near term.

On the upside, a short-term top is seen at last  week’s high at $1,434 and that represents near term resistance. A minor bearish  shooting star emerged as the market set that high on August 28, which reveals  the bulls were unable to defend the intraday push to that high. Near term, the  gold market remains on the defensive, and could see sideways consolidation or  downward pressure as momentum continues to work off its recent overbought  status.

However, the gold market will remain finely  attuned to any headline news regarding the Syria or potential military  conflict, which would provide a knee-jerk bullish support for the yellow metal.

Beyond the $1,434 zone, if gold musters enough  strength to conquer that ceiling with a sustained rally move near term, the  next major bullish objective lies at the $1,490.50 level, the early May high,  which roughly matches a measured move target from a bottoming pattern on the  daily chart.

The near and medium term trends are bullish for  gold. The market has stalled out at the $1,434 level short-term. The market  sees a large amount of event risk over the next several weeks, including  potential action over Syria, this Friday’s U.S. jobs report, the September  17-18 Federal Open Market Committee (FOMC) meeting and potential news on when  the central bank may decide to begin tapering its monthly asset purchases. The  burden is on the bulls to maintain the uptrend. Near term, as long as $1,351  remains intact, the trend pattern will remain positive.

Daily December Comex Gold Futures Chart

Kira Brecht is managing editor at TraderPlanet.

Gold Goliath is not your typical gold dealer.

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