A faint light is often all that is cast upon truly outstanding positioning strategies before they ready. Fundamental analysis, awareness of monetary policy developments, positioning conditions and other trend characteristics followed allow candlestick charting analysis to shine needed illumination. Martin B. McGuire
Gold breached 1300 two sessions ago and
has since added $31.50 or 2.4%.This is
the kind of reaction that was expected and it is likely to be given notice by
I don’t imagine there is a huge short
position in gold, though there seemed to have been quite a few predicting a
near-term reach to $900 or even $750. I
do not expect gold to advance because of short positions.Rather, I suspect there is again a general
lack of participation that could with rising prices once again give rise to its
inclusion in a greater number of portfolios.
My premise for continued gold rise has
long been the expectation that central banks and in particular the Fed have the
capacity and willingness to raise the level of inflation.At the same time, I recognize monetary policy
is an inexact science.Historically, the
Fed has had a tendency to allow accommodative policy to outstay its useful
life, thus at a minimum setting the stage for higher levels of inflation.
This is not without consideration to the
numerous undershooting over the last years where the Fed had projected real GDP
growth well beyond that which was eventually seen. Each time the Fed came back with additional
levels of monetary accommodation. Discouraged by repeated attempts to conquer
slow growth, it is easy enough to imagine the Fed eventually doing more than
needed to break free of the bonds of underperformance.
Some might argue that recent weaker than
expected economic reports including employment, production and consumption have
again awakened concern for additional monetary policy accommodation and thus
greater current prospects for inflation and rising gold prices.To this I admit to having greater certainty
that the Fed will eventually ease too much and too late than that it has (to
date) already done so.
Technically Speaking; XAU spot has
experienced 8 (eight) new session highs since January 31st without a 3 (three)
session pause and thus is mildly overbought. I am not terribly concerned that
slight overbought conditions will curtail price advance as the recent low is
not that far away in either dollars or time.
Today’s price action was a closing bozu with
high and closing price at 1331.50.This
strong close suggests continued gains forthcoming.Additionally, the last three sessions
represent a strong bullish advance in ‘three white soldiers’. While candlestick theory rarely offers
objectives, we might look to the rather striking tops formed late August and
early May and suggest important levels at roughly $1415 and 1473…after
breaching a widely recognized 1350 level.