Where is Gold Heading? – Will You buy or Sell Gold?

Gold_200_Moving_Average

Gold 200 Moving Average

 

Early in February Gold’s 200 moving average line (the chartist golden line) crossed the chart over; apparently ending Gold’s downtrend. In recent weeks the trend has been supported in its early stage by blurry economic data coming out of the U.S.

The new up-trend reached a two months high last week.  Since then, the trend have slightly derailed as the Dow Jones recovers from Europe’s political tensions.

Low inflation and positive economic data for February published in the U.S. is currently weighing on Gold’s price. The U.S Federal Reserve has all intentions in reducing its monthly bond purchase program and has warned investors that interest rates will eventually raise.

Will you buy or sell Gold?

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The current retreat from the top could have two major implications:

  1. Gold  is poised for more decline. A breach below the 200 moving average could be a confirmation of such.
  1. The new trend could be forming a lower low.
Gold’s price is trading lower at resistance level. Technical indicators are pointing at further weakness and  lower prices. Currently the sudden change in the short term trend is seen as correction as long as it doesn’t breach the 200 moving average. Expectations are of a turn toward the upside confirming an end to the bearish momentum. Such up-turn will offer a long term buying opportunity.

But until them, Gold continues a risky buying proposition. For the new up trend to be taken seriously and be sustainable; Gold prices will need to move higher toward $1460.

Open interest and volume is one of commodity traders tools often used by traders to identify trends and they reversals. The chart below is the volume and open interest change for the last five trading days. Learn more about Open Interest and Volume.

chart2

 

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