Gold – 19 Sep Update

Shortly after I wrote and posted the gold charts yesterday the Evil Empire once again orchestrated one of their famous pre-FOMC attacks to bring gold down. This helps their cause, to hide, because anything that comes from the meeting is constructive to gold and the idea that we are truly screwed. My initial hope was that the 1790 area was going to hold and we would make a play for 1850. Instead we got a test of the area just above support at 1765. So far it has held and at least for now another lower low has not been made. In fact, a lower high was made with the high being above yesterdays high and a higher low than 1765 would neutralize the current downtrend. If 1765 falls then the Bollinger band and the Fibonacci 38.2% retrace supports at 1753. Finally the 45 day moving average provides strong support at 1732. Resistance is yesterday’s high and the 18 day moving average at 1828.

A symmetrical triangle is shown and is often a consolidation or continuation pattern. If this is confirmed it should breakout higher as price approaches the apex. Somehow I do not see that happening today, usually gold is subdued during the FOMC meeting. In fact I could see a move to kiss the 45 day moving average that would widen the consolidation triangle (dotted line). This would effectively postpone the breakout for another day or two in time for the Bernank’s announcement of QE3. Stochastic is now indicating over-sold and RSI is neutral.

Unlike spot gold, PHYS, the real and 100% allocated gold bullion fund, did put in a lower low. So far price is holding at support around 15.48 and finding resistance at the 20 day moving average, currently at 15.94. The Bollinger band and the 50 day moving average are lining up to support at 15.08. Stochastic is approaching over-sold and RSI is dipping just below neutral. Divergence is still being indicated and will take a price move down to 14.42 to nullify or exclude. Until that happens, price is not following through with the thesis of weakness that the technical studies indicate.

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