Gold – Monthly Analysis for January 2015

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Gold futures closed the month of December at 1182.64, about 1.26% higher for the month. The monthly candlestick pattern does not show any significant shift to the overall bearish sentiment in the market, but the fact that we have a bullish close after November’s candlestick closed in a doji or an indecision candlestick pattern gives inclination that we could see some upside to Gold in the near term.

Prices look to be stable, trading near the major support/resistance level zone between 1242.05 and 1181.1 levels. To the upside, the major resistance stands at 1390.5 while to the downside the immediate target comes in at 980.35 levels.

As price is still close to the major support/resistance area, it will be premature to assume the future price action at this point and perhaps the weekly charts in the coming weeks will give further clues in the short term. While it is a known factor that Gold futures are bearish in the long term, we could expect to see a few bounces as prices tend to push lower gradually.

Gold

 

Keeping in mind the technical analysis for Gold, the minor trend line plotted from the lows of 724 in late 2008 shows this trend line being broken in September last year. A possible retest of this breakdown level near 1250 – 1280 could most possibly be the next play for Gold if we are to assume that December’s bullish close will see a possible correction to the upside.

If Gold does manage to retrace back to 1250 – 1280 levels and with a possible confluence of bearish candlestick patterns at that level, we could assume that Gold futures could possibly fall further declining to lows of below the $1000 psychological level.

The primary driver of the bearish trend in Gold futures has been the rising Greenback. While last year did have its share of geo-political tensions, Gold futures failed to capitalize on the events such as the Russia-Ukraine crisis or even the Ebola epidemic. If Gold continues to behave this way, ie: not reacting much to the global uncertainties, we could very well expect to gauge the weakness in Gold mostly in terms of how much more the US Dollar could rally.

In terms of price forecasting for Gold, the support/resistance level of 1180 – 1250 will be key. A bullish decisive close above this support/resistance level will clearly show a return of the bullish trend in Gold, at least for the short term, while a bearish continuation below this support/resistance level will indicate more declines in Gold prices this year. If the declines come way ahead of the currently expected US interest rate hike in June 2015, then Gold futures could possibly look for a very bearish outlook for most of 2015.

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