Gold has been consolidating for a couple of weeks. It was held around the April higher near 1331. After a failed attempt to find a price top, traders held gold price mostly above 1310 until it soared during the 7/9 session.
FOMC Meeting Minutes:
Heading into the FOMC meeting minutes, which was released during the 7/9 US session, xau-usd was already trading with bullish bias within the 2-week consolidation. The tone of FOMC meeting minutes was relatively hawkish, or at least not dovish as some would expect after the poor Q1 GDP revision we saw several weeks back. The minutes focused on the end of QE by October, and did not push back the interest rate hike schedule which is mid-2015. Still, the USD fell against most majors.
With the weaker USD, traders bought gold above the consolidation high, signalling bullish continuation. The breakout exposes several resistance factors above.
– First there is the 1354-1362 area that contains some common resistance going back to March and Nov. 2013.
– Gold found support at 1240 in June, and established a higher low than the 1182.35 end-of-2013 low. This shows a bullish development in 2014, and the 2014-high is therefore in sight after the current bullish breakout.
– Before getting to that 2014-high, the 1354-1362 area I mentioned should be respected. It could be reinforced by a falling resistance from a descending triangle, seen better in the weekly chart below.
– If price dips from this area, look for support around the currently broken consolidation high, near 1330. Respect of the broken consolidation area as support should help gold bugs gain confidence to challenge the triangle resistance.
The weekly chart shows a descending triangle that has been forming since the August 2013 high near 1433. Here are some observations.
– The triangle follows a bearish trend that began from 1920, the historic high made in 2011.
– Note that before the current triangle, there was a descending triangle that formed from Aug. 2011 to March 2013, before the breakdown in April 2013.
– The momentum in the weekly chart has become neutral with the weekly RSI stuck between 40 and 60. However it also reflects maintenance of the prevailing bearish momentum. Essentially the RSI is saying that the bearish momentum has stalled in 2014, but is not killed.
– AS the weekly RSI approaches 60, as the daily RSI pushes above 70 or 80, and as price approach the triangle resistance and the 1355-60 area, watch out for sellers.
– If the market does show resistance, look for a dip toward 1320-1330, the upper half of the consolidation zone that was just broken. If the market can support gold here, look for another attempt to break the triangle resistance.
– The 2014-high will be exposed only with a break above 1362 to clear some common resistance and the falling triangle resistance.
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