Gold Analysis – Price Near Key Technical Level – Fiscal Cliff, Euro Debt Still Key, Monsoon Impacts Diwali
Gold Technical Analysis Update
- Gold experienced a steady decline overnight but subsequently found a bid during mid-day trading on November 13th, the precious metal has subsequently appreciated back to the $1730 per ounce level during recent trading. This level is the 50% retrace of the last swing lower, from the key $1800 area resistance level (1795.8 – 1670.97).
- The attached XAUUSD daily time frame analysis chart shows price has not yet made a daily basis close above the 50% corrective mid-point level as of yet. This key technical area is also aligned with previous support lows from September/October which may see additional resistance.
- This all comes in the context of a weekly bullish engulfing candle, as highlighted in our weekend gold analysis update. Technical analysis traders often consider a move above the candle as being a prerequisite requirement before the candle pattern has triggered. There has not been a move above last weeks candle high yet.
Euro Debt And Fiscal Cliff Rhetoric Dominating Near Term Sentiment
- The EUR/USD has rallied this morning after a report was released showing policy makers in Germany are investigating the possibility of expediting the next bailout payment to Greece, according to German tabloid Bild, which reported the German govt may decide to bundle three bailout tranche payments into one large €44 billion payment.
- Greece has a commitment to pay off €5 billion of debt this week. This report from Bloomberg has Thanos Papasavvas, the fixed income and currency strategist at Investec Asset Management Ltd., discussing the outlook around Greece receiving 31.5 billion euros in fresh bailout loans. A Greek euro exit is still ‘Highly Probable” according to Papasavvas.
- The fiscal cliff will continue to be a key focus as it is potentially the biggest risk the market has to deal with at present. As long as the so called “fiscal cliff” remains as an issue, gold is viewed as an attractive proposition by many, offering purchasing power in the face of financial market uncertainty.
Indian Gold Demand Muted Despite Diwali Festival
- India is one of the biggest consumers of gold and sales of the precious metal have been hit during the Diwali festival (with associated gold dowries etc) by this the poor monsoon, according to the Economic Times of India. Jewellers and bullion dealers advise that rural India is not comfortable spending on the precious metal as they have not yet released returns from the kharif crop.
- In contrast, the Bombay Bullion Association has reported retail Gold bullion demand increased by 8.3% year-on-year, during the Dhanteras festival (late last week). Gold prices in India are often determined by international prices. Over festival seasons, local demand along with foreign exchange fluctuations also influences gold prices to a certain extent. The Indian rupee is trading over 10% lower against the US Dollar in comparison with the exchange rate level seen during last year’s Diwali festival.
Gold analysis update November 13th 2012