Gold – 26 Oct

Gold closed up again for the 4th day in a row and approached resistance at the 45 day moving average (blue). Clearly we have a valid breakout with a 2nd close above 1680, but for the traders out there the present chart poses a dilemma because we are above the Bollinger band and stochastic is entering over-bought territory. This is not a safe place to be adding long positions. A better entry would be after pullback swing low that is higher than the last swing low at 1604. This is most likely to happen and then a stop could be placed just below the potential higher low. A higher swing low would also establish a pattern of higher highs and higher lows, by definition an up trend. Of course investors can just buy physical and relax. Support is at the 1680 level and I would like a pullback to this level or slightly higher for a test and a decent entry point. Resistance is the 45 day moving average followed higher by chart resistance at 1775.

The Bollinger bands are now expanding as I thought they would a couple of days ago. Stochastic is just entering over-bought territory and RSI is moderate with a reading of 56. The 18 day moving average (magenta) is now climbing and looks like it will cross the 100 day moving average (gold), a bullish development. This current move has been steady and uninterrupted for $120 and I think a pullback is likely. Buy the dips and buy physical.

It is clear that market sentiment is supporting the idea that any solution in Europe is merely a can kicking exercise and inflationary. Gold is reacting as a competing currency and is catching a bid from those speculating that people will want to hold gold over Euros, Dollars, Yen, and other debt based currencies. Can’t say I blame them there.

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