The Bears had the best of things yesterday in Gold as we sold off from a high of 900.4 to post a low of 878.5 before recovering a touch for the close. There are still no clear technicals to suggest where the next short term move is going to come. For this to happen we are waiting for a breach of either 873.2 or 935.5. We have used the weekly chart today to remind ourselves of the bigger picture. Back in May 2005 Gold was trading 514.7. The prolonged rally to march of this year has seen us reach a record high of 1043.1. The 38.2 Fibonacci Retracement of this move comes in at 841.3 so it was no surprise to see the Bulls step up to the plate as we approached this level.
Indicators in Play
Fibonacci introduced his sequence of numbers to mathematics back in the 1200’s. These numbers appear in all walks of life but have an eerie influence on trading. We use the 38.2 level as an indication of the strength of the correction or indeed if the longer-term trend has changed contact.
Summary
The Bears are having the best of things at the moment but we are still experiencing reducing volatility and swings. Longer term we would still favor the Bulls whilst we are above the major 841.3 Fib support and would buy dips to here.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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