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Gold Relative Strength Divergence At Record Highs 6/9/11

XAU/USD Analysis 6/9/11

Gold has seen a break above the previous record high with a 1920.80 level hit today as liquidity returned following the extended Labor day weekend in the US.  Price has subsequently retraced from the highs and the RSI oscillator has formed a divergence, as can be seen on the attached daily Gold chart.

golddivergence20110906 1749 thumb Gold Relative Strength Divergence At Record Highs 6/9/11

  • Gold hit a record 1920.80 level during early trading today.
  • Oscillator divergence noted on the RSI 14 Gold daily chart is giving a technical heads up to a potential loss of bullish momentum.
  • The greenback is trading up against most of the major currencies today which could also be influencing the XAU/USD price action.  We have been bullish USD since the USDX broke above the descending trend line recently.
  • The precious metal dropped from the record highs amid speculation that Gold selling could be taking place as traders cover CHF losses.  This comes after the SNB advised of a minimum exchange rate ceiling of 1.20 per euro.
  • The previous attempt at a break above the 1900 level on 23/8/11 culminated in a drop to the 1700 area.  It remains to be seen whether there is significant supply remaining at 1900 but this second attempt has met with initial resistance.
  • We see potential for consolidation at current levels before Gold resumes the longer term uptrend.  A correction to the 1815 area, which is the  50% retrace of 1702.67 > 1917.82 and is aligned with price structure support, may be seen in the near term after this failure to hold above the previous record high.
  • Any break below 1815 could see further interaction with the ascending trend line which held the last major drop.  We would need to see a sustained break below this trend line in order to shift from our mid term bias to the upside.

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