Nearby Gold Monthly Technical Analysis for January 2015

Nearby gold futures finished the year lower, but managed to eke out small gains the last two months. If you track inflation and Fed activity then you no doubt have a bearish bias on gold which is the logical way to think.

The variables that could produce a rally in 2015 are escalating economic turmoil in Russia, a break in the stock market or any weak economic news that derails the Fed’s plans to hike interest rates beginning in perhaps April or June.

If the Fed is unimpeded by outside influences then this rate hike will likely pressure gold for most of the year. Bullish speculators will have to focus on the Russian situation to get their jollies in January because as long as the U.S. Dollar remains firm, any gold rally is likely to be limited.

The main range is $736.60 to $1953.30. Its retracement zone at $1344.20 to $1200.70 kept gold in a range for 16 months before the market finally posted three consecutive monthly lower closes to end 2014.

Because of the closes under the lower or Fibonacci level at $1200.70, there is a downside bias to start the new year. Overcoming this level in January could trigger a short-covering rally but don’t look for a change in trend on the monthly chart. In January, at the most traders could expect on a major short-covering rally is a move into the resistance angle at $1313.30.

A failure to overcome $1200.70 will mean that gold is still in the strong hands of the sellers. Taking out $1131.10 will negate the monthly closing price reversal bottom chart pattern that has been giving this market life since November. If $1131.10 fails then look for an eventual washout down to the next uptrending angle at $1036.60 this month.

Barring any major shift in Fed activity or an unpredictable disaster, look for gold to spend most of January straddling $1200.70. Trader reaction to this level will set the tone for the month.