Gold Rising After Stress Test Results Fail to Impress

Gold Rising After Stress Test Results Fail to Impress

By: Ben Myers | YesOption | On:27-10-2014 05:49
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Where To Trade Gold

Figure: Daily chart for Gold

 

Gold

Gold, after being unable to move above its 100-day moving average of $1257 and breaking below its important support zone at $1242, formed a very safe base near the $1230 level on the daily chart. The month of October has been very good for the gold bulls albeit gold witnessed a sell-off at the beginning of the month.

A pick-up in holiday demand from India was considered the major reason for the surge in prices. Gold prices were indeed higher in the Asian trading session because of the Eurozone stress test results, which although produced positive outcomes, but have given rise to speculation as to the overall health of the European banking system.

As per the report released by the European Central Bank, 25 banks failed the stress test, which shows signs of capital inadequacy and a rise in non-performing assets. Traders should now shift their focus to the upcoming release of the FOMC Minutes on Tuesday in order to properly understand the future path of action that the Fed will take with regards to the short term interest rates. It goes without saying that any increase in the interest rates will likely cause the dollar to rise, which will adversely affect the gold.

When looking at the daily chart for the gold, the precious metal seems to have formed a base near the $1230 mark, with resistance positioned at the $1242 level. Additionally, the next support level kicks in at around $1217.  Meanwhile, the momentum indicator for gold is currently in bullish territory and is showing no signs of an imminent reversal, indicative of buying interest at current levels. Lastly, the relative strength index continues to trade in the no trade zone with no signs of letting up.

 

Actionable Insight:

Short the Gold if it moves below $1228 for a short-term target of $1207

Long the Gold if it moves above $1242 for an intermediate target of $1257

Ben Myers

Ben Myers

Success = few pips, thousand times

Ben Myers is one of the most respected and trusted names in the financial trading industry. Following a long and successful career with HSBC, Bank of Ireland and running his own investment firm

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