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Gold Technical Analysis - Gold Trading: 2015-12-07

ECB has pushed gold prices up

On Friday gold was gaining ground for the 2nd straight day. Investors reacted on the results of the ECB meeting and the weakening US dollar. Some market participants believe the massive shifting from the shorts to the longs in gold has begun. In recent weeks the stockpiles of SPDR Gold Trust, world biggest gold-backed ETF fund, fell to the lowest since September 2008. The number of the shorts on COMEX has hit the historical high. Will the gold prices continue to rise?

On Thursday the ECB has cut the already negative deposit rate from -0.2% to -0.3%. Moreover, the Bank has expanded its bond-buying programme which stands for further monetary easing. The additional growth factor for gold is the vast US dollar weakening as those two assets have strong inverse correlation. Since the start of the 2015 the gold has lost 8.4% while the US dollar index has advanced 7.5%. On Friday the November US non-farm payrolls came out showing the additional 211’000 jobs were created exceeding the expected increase of 200’000. Nevertheless, markets expect the minor rise in the US interest rates as the result of the Fed meeting on December 16, given the latest macroeconomic data. The factors made the gold surge.

Gold_USD

Gold

On the daily chart Gold: D1 is correcting upwards from its 6-year low having surpassed the support of the downtrend. The Parabolic indicator and MACD have formed the buy signals. The Bollinger bands have severely widened which may mean high volatility. RSI has formed the positive divergence. It is on the rise but has not yet reached the overbought zone. The bullish trend may develop in case the gold surpasses the third fractal high and the second Fibonacci level or the second fractal at 1100 or 1088. This level may serve the point of entry. The initial risk limit may be placed below the six-year low at 1046. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 1046 without reaching the order at 1100 or 1088, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

PositionBuy
Buy stopabove 1100 or 1088
Stop lossbelow 1046

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