Gold: Technical Analysis Points to January Trading Bottom
Here are three factors that gold investors should be aware of over the coming weeks.
2. The January Barometer
Each of the past three years have seen significant trading bottoms in or around January, and this year appears to be headed in that direction again. The Gold Bugs Index (INDEXNYSEGIS:HUI) is extremely oversold and trying to stabilize. The index is also near its 61.8 Fibonacci retracement of the summer-fall 2012 rally.
3. The US Dollar
The dollar is the wild card here. And as one of the best corollary indicators for the direction of gold, it bears watching. After rallying out of a nice rounded bottom in 2011 (which correlated with a topping pattern in gold), the dollar spent much of 2012 forming a head and shoulders pattern. A sustained break above 81 would foil the pattern and likely start a move higher for the dollar (bearish for gold). However, a break below the 78-79 neckline level, and gold will be in rally mode.
Other recent articles/notes of interest include Pragmatic Capitalism's Two Reasons to be Bullish on Gold, wherein Cullen Roche highlights David Rosenberg's 2013 bullish forecast. He points out that monetary expansion and stagnant gold mining production are at the heart of the bullish argument. Also see Minyanville's Gold Should Be Nearing a Major Bottom, wherein David Bannister points to a late December/early January trading bottom.
Trade safe, trade disciplined.
Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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