Home Featured Is Gold At A Tipping Point? 2 Scenarios For Traders Now

Is Gold At A Tipping Point? 2 Scenarios For Traders Now

Is Gold At A Tipping Point? 2 Scenarios For Traders Now
Gold, rush, nugget.

By Kira Brecht

(Kitco News) – As traders return to work Monday morning, gold prices have already edged off their overnight lows. Gold buyers are nibbling as the yellow metal drops to test the lower boundary of its two-month trading range.

The news: Fed Chair Janet Yellen’s speech last week triggered renewed speculation that the central bank may raise rates sooner rather than later.

Is it another case of the boy who cried wolf? The renewed hoopla over September being a “live” Fed meeting may well be another case of the boy who cried wolf.

If the Fed is going to raise rates in September, somebody forget to tell the US 10-year note: the yield remains in the same sleepy range between 1.63% and 1.45% that have confined the market since mid-July. The CME’s Fed Watch tool reveals that Fed fund futures are pricing in a 30% probability at the September 21 Federal Open Market Committee meeting.

Even if the Fed does pull the trigger on a .25 basis point rate hike, the official interest rate remains well below historical norms. The federal funds rate stands a 0.25-0.50%. A small blip higher of 0.25% would not mean much in real economic terms, and it would still remain below 1.00%.

Technically Speaking
Gold buyers are supporting the range bottom. Let’s take a look at Figure 1 below. Since late June, Comex December gold futures have shifted into a neutral sideways range bordered by support at $1.314.80 and resistance at $1.384.40.

A potential triangle formation has been developing on the daily chart (seen in red), but gold prices have marginally breached the lower trend line. Significantly, the gold contract, has held above the $1,314.80 range bottom.

Did Janet Trigger Another Buy Spot In Gold?
The burden remains on the bulls to continue to defend retreats to the lower boundary of the two-month range.

Scenario A: If support at the range bottom at $1,314.80 cracks –this would be a bearish short-term signal. The 100-day moving average, shown in blue, stands as next support and a bearish target on a range breakdown at $1,301.70.

Scenario B: If support at the range bottom at $1,314.80 holds firm –this would be a bullish short-term signal. The 20-day moving average, shown in black, stands as a nearby bullish target at $1,346.60.

Gold bulls face some headwinds this week with the strength in the U.S. dollar index and a spate of key U.S. economic reports. Traders will look to Thursday’s ISM release and Friday’s employment report as potential indicators on whether the Fed will hike at its September meeting.

Trading plan: Watch the price chart. Define your trading levels, your price objectives and your stop-loss points. Plan your trade and trade your plan. Gold trade could become volatile this week.

Disclaimer© 2010 Junior Gold ReportJunior Gold Report’ Newsletter: Junior Gold Report’s Newsletter is published as a copyright publication of Junior Gold Report (JGR). No Guarantee as to Content: Although JGR attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. JGR, its associates, authors, and affiliates are not responsible for errors or omissions. Consideration for Services: JGR, it’s editor, affiliates, associates, partners, family members, or contractors may have an interest or position in featured, written-up companies, as well as sponsored companies which compensate JGR. JGR has been paid by the company written up. Thus, multiple conflicts of interests exist. Therefore, information provided herewithin should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. No Offer to Sell Securities: JGR is not a registered investment advisor. JGR is intended for informational, educational and research purposes only. It is not to be considered as investment advice. Subscribers are encouraged to conduct their own research and due diligence, and consult with their own independent financial and tax advisors with respect to any investment opportunity. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the companies mentioned herein. Links: JGR may contain links to related websites for stock quotes, charts, etc. JGR is not responsible for the content of or the privacy practices of these sites. Release of Liability: By reading JGR, you agree to hold Junior Gold Report its associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.

Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report does not take responsibility for accuracy of forward looking statements and advises the reader to perform own due diligence on forward looking numbers or statements.