Gold Prices July 22, 2013, Technical Analysis

The gold markets had a slightly positive session during the Friday hours, gaining a little bit over eight dollars an ounce. However, we find ourselves still stuck below the $1300 level, an area that we have said needs to be overcome in order to start buying. Even with that move, we would be a bit hesitant to hang onto a trade for anything more than about $50 per ounce. The $1350 level does look like significant resistance, as it was still positive for support previously this year. Longer-term, we do like gold regardless of present conditions. However, the leverage that a futures contract affords the trader can cut both ways, so we do believe in practicing discretion at this point in time. If we somehow managed to break down below the $1200 level, we feel the gold falls apart and heads towards $1000 an ounce, an area that could possibly be a career making trade for those of you who are able to hold on through the volatility.

The $1000 level is an area that we remember quite well. This area was significant resistance a few years ago, and quite frankly we missed the move higher from the initial outset. Granted, we were long gold several times after that, but one cannot help but notice that it was the “perfect set up.” Every once in a while, you will see a spot on the chart that is just too perfect to pass up, this is how we feel about the $1000 handle, and as a result if we can get that move – we would buy gold hand over fist.

On the other hand, we may simply not get down there. There is a significant amount of support in this general vicinity, and you can see that there is a little bit of a “W” pattern forming as well, which of course is a very bullish sign. Pay special attention to the Federal Reserve and its comments as well as whether or not it starts tapering off of quantitative easing in September. If it does not, and the Federal Reserve blinks yet again in the face of the markets, expect the US dollar to get absolutely annihilated, while the gold markets take off to the upside.