Gold Breaks From Consolidation Under $1,320

by on April 14, 2014 8:55 am BST

Gold has made a modest rebound after the precipitous drop of over $100 per ounce from the recent high of $1,392.60 per ounce. Gold has been a difficult trade as the safe-haven appeal seems to be broken once again, as it declines with the global equity sell-off. The precious metal has seen upwards spikes relating to the confusing and vague interest rate outlook from the Federal Reserve.

Gold futures spiked higher on last week’s FOMC minutes. “What we saw this week was quite interesting because it emphasizes the rolling back of the seemingly hawkish stance that we saw at the previous meeting and I think gold is taking some comfort from that,” said Jonathan Butler, an analyst at Mitsubishi Corp.

Gold has been fickle, and hedge funds and other speculators misplayed the “slam dunk” sell by cutting their net-long positions in the week ending on April 8 just before the FOMC minutes, which were more dovish then expected. “Gold has been so zeroed in on central bank policy that the release of the minutes made it more likely that the Fed is going to taper much more slowly,” said Jeffrey Sica, president of Sica Wealth Management.

Gold began to consolidate by the end of last week underneath $1,320 per ounce, but increase demand opened the week higher. The geo-political tensions between Ukraine and Russia are increasing with reports of Ukrainian special forces reacting violently to pro-Russia separatists. It is likely that Russian President Vladimir Putin is looking for any reason to wage an attack against Ukraine. If violence continues to worsen, gold’s safe haven quality may ignite.

Price action is seeing resistance near $1,330 with Fibonacci resistance at $1,335. This corresponds to the 50 percent retracement move from the recent high of $1,392.60. Support will likely be found at $1,321 and $1,316 per ounce.

4H Chart of GC

4H Chart of GC