Gold Consolidation Following The Fed’s Continued QE

  • Posted September 27, 2013

Quite a short update today. As you may know and as I stated in my previous video, the FOMC did not decide to taper its QE program this month. Once the markets heard the news, the metals rallied like never before. This was due mostly to the non-tapering statement by the Fed, and also because there was a long over-exaggerated bearish candle where traders felt the FOMC would taper this month. That candle broke the support of original channel. Shortly thereafter, the hope for Gold to see $1400 soon diminished as just two days later, a Fed Governor stated that the FOMC may taper in October 2013. Again, rhetoric from the Fed created panic in the stock markets, in particular, the metals market. Ever since then, Gold consolidation has remained.

Gold Consolidation is Not the Best Time to Trade

gold consolidation | Gold Consolidation Following The Fed's Continued QEIt is not smart to trade and guess the direction of where Gold is headed as the gold consolidation could fire to the upside or to the downside. If the gold consolidation fires south, look for 1300, 1280’s & 1275 area to bring support. 1275/76 is a key level for Gold to hold after it’s consolidation, as this is the 61.8% level of the current bullish trend. As long as Gold stays above this level, Gold’s intermediate bull run stays in-tact. Also, we want to make sure the bounce, aka momentum, from support is quite high to the upside; This will give us confirmation that the fire from the gold consolidation, though it may initially be down, is still going to keep this bull trend alive. However, if gold pierces below the 1275 area, then it will most likely not reach 1400’s, and we need to look for Bearish entries as the bullish trend has been broken.

Obviously, if price shoots up from the gold consolidation, then it does make it quite likely that Gold could see 1400’s. Should it fire north or bounce hard from any of the above support levels, we need to look to see if it can take out the 1380’s & the 1400 level. Only if it can stay above 1400 would we then expect Gold to “kiss” the 200 Day Moving Average around mid 1400’s.

Again, there are a different set of rules and a different mindset for those acquiring physical gold for the future. But for trading purposes, let’s wait and see where the price fires from the current gold consolidation. It would be nice to see Gold keep it’s intermediate bullish trend.

Hope it helps,

Vinny