Technicals | Sep 09 2010
By Rudi Filapek-Vandyck
Time to get worried about gold? Several commentators seem to have taken a negative view on the precious metal's short term prospects and among them are technical market analysts at Barclays in London.
The chartists remain gold bulls, on a medium term horizon, but for now the short term increasingly looks shaky at best, the analysts report this morning.
History shows gold tends to oscillate around pivotal points and price action is currently around all-time highs. In addition, open interest is fast approaching the all-time highs at 600k contracts while the CFTC Commitment of Traders statistics show non-commercial (aka large speculators) long positions at 273k contracts and fast approaching previous bullish extremes in the 283k/297k area, report the analysts.
Combine one with the other and the chartists believe the gold market is poised to once again reach what they call “bullish saturation”. They add this seems particularly the case amongst hedge funds.
This is why the analysts have taken the view that gold is likely going to struggle near US$1265/oz and this increases the odds for a wave of profit taking to ensue. Trendline support comes in at US$1238/1240, with the chartists adding any pullback would fail to cause chart damage unless US$1210 is broken.
At this point, they have not seen anything suggesting gold will break below US$1210/oz.
Once the (mild) correction has run its course, the chartists continue looking for gold to rally towards US$1300 and beyond towards US$1350 into year-end.
Similarly, the chartists note important peaks near US$20.00/oz in silver are being tested. Through here next opens up US$21.35/oz, they believe.