Gold: Losing grip on post-FOMC gains

Gold’s post FOMC rally seems to have run out of steam as profit-taking hits before the weekend. We are approaching a key test for the yellow metal – can it manage to stay above key 100 and 50-day sma supports at $1,345-48?

Could the limited gains in the gold price this week suggest that the market is focusing on the prospect of tapering later this year, or under the new governor in 2014? Interestingly, the gold price rally did not surpass the highs from late August above $1,400, suggesting that thoughts of tapering are not too far away from the market’s consciousness, which could keep a lid on the gold price for the medium-term, leaving scope for further downside.

Technical perspective:

In the short term, the most interesting thing about gold is how it reacts to the SMA support zone. Below $1,345-48 opens the way to $1,300 – the lows before the decision by the Federal Reserve not to taper asset purchases. But we may need to see the dollar recovery gather pace before we can expect to see the gold price drop through this level, so watch what the dollar index does. If it can get above 80.50 then it may extend its up move back to 81.10 – the base of the weekly Ichimoku cloud.

On the upside, key short term resistance levels in the gold price include: $1,375 – 21-day moving average, above here opens the way to $1,433 – the high from 28th August.

Source: Forex.com

20.09.2013