Tuesday, October 29, 2013

Gold reaches out once again. Is a turn on the cards?


Click on the image to enlarge

Gold is reaching for the 200 Day Simple Moving Average (SMA) once again. If it were to coincide with this important indicator, it would be the first occasion it would have done so since the start of 2013. Therefore this situation is one that must figure large on the radar of all traders.

From the fundamental point of view, and as pointed out here on many occasions, the biggest single factor in the price of the precious metal is the expectation on the part of traders of whether Quantitative Easing in the USA will be discontinued sooner rather than later. Many commentators and market participants have taken the view in recent times that tapering of QE has been long fingered, due to the fact that the debt ceiling negotiations in Congress have not been definitively dealt with and could flare up again in the New Year of 2014. 

Two things: (1) The political theatre in Washington has probably run its course due to the damage it seems to have done to the public image of the Republican Party and therefore its chances of re-election and (2) it can be truly amazing how quickly things get priced-in in the currency and commodity markets. When everyone else is discussing it the market will have moved on.

These considerations could have the effect of, once again, reminding traders that the long-term trend in gold is still down, and a turn to the South is justified. If this is the case, its rendezvous with the 200 Day SMA would be a good place to expect it to happen.

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