By FXEmpire.com
The gold market was very quiet for the session on Wednesday as the market continues to be contained within the down trend channel. The market has been selling off in a consistent manner over the last month or so, and the trend could continue as long as the Federal Reserve is hesitant to implement more quantitative easing.
The recent comments and minutes by the Federal Reserve have had traders reconsidering the assumption that quantitative three is coming. The weak jobs number earlier this month got traders thinking that it could happen again, so as you can imagine – there is a lot of confusion when it comes to the issue now.
The gold markets should find at least some support by the fact that there are other central banks out there easing, and this will cause a bit of distrust in paper currency. However, we may find that the US dollar could be an exception, at least as long as QE3 isn’t coming. Because of this, our favorite trade is actually to buy gold in Euro terms.
The gold markets are caught in this channel, and as a result we have a relatively straight forward set up. The top of the channel needs to be broken on the daily close in order to think that the uptrend will continue going forward. The downside should continue to find support by the bottom of the channel, and as the market has been so strong over the last decade or so, a precipitous fall is unlikely. Because of this, in the long run we are bullish of gold. However, the action lately has been decidedly bearish, and with this we cannot argue.
The $1,600 level looks like a significant one to us. If this level gets approached by the market, there is a strong chance that we will see strong support. The supportive action we may see there could be a great buy signal as we are still a little cautious when it comes to selling. The breakout above the top of this channel would also have us buying as well.
Gold Forecast April 12, 2012, Technical Analysis
Originally posted here
