Gold preview – week of May 18, 2015

Last week

Gold futures, week ending May 15, 2015150515-gold prices

Well that was easy. At the open the gold futures quickly dropped to within $0.80 of Nat’s key line (and first support level) long enough for everyone to get filled, then marched up to her second sell level at $1222, and moved past it far enough to ensure everyone could cover. Net profit for the week: about $42 per contract. It doesn’t happen every week, but when it does … sweet.

The breakout came on Wednesday on good upside volume after some disappointing economic activity reports, especially the retail sales numbers which were well below expectations. Other reports were also weak: Industrial production fell 0.3% in April, Empire State index rebounded to 3.1 in May and the University of Michigan consumer sentiment index fell to 88.6 in May. The weak data suggest that Fed may delay the interest rate hike from June until September, or perhaps later still. It brought lots of hedge activities into gold trading.

In last week’s preview we pointed out that the weekly chart had formed a doji near the bottom of an extended downtrend, a pattern that often presages a reversal of the previous trend. That’s what happened this week, but a doji is not always a reliable predictor of future market action. Treat it as a straw in the wind, not as a weather forecast.

Here’s the annotated 60-minute chart of last week’s price activity and volume.

Gold futures, May 15, 60-minute bars 150515-gold-60

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Gold futures, weekly chart

1205-1200 is a key zone for this week, and below it there is the 1198-92 support zone. Both need to prevent GOLD from falling through and help the price move through the major resistance zone at 1235-37.

Remaining above the 1220 level in the early week will be bullish. A move below 1192 will be bearish again. But last week’s closing price suggests that GOLD should have a high continuation move this week. Therefore the early pullback will give new buyers a chance to get in on the buying side.

The short term has a little overbought condition, but it is not extreme. If the 1205-1192 zone does hold up, the up leg move could hit its max at the 1265-75 zone.


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