The leg which has started on Oct. 21 at $1255.20 per ounce looked serious from its beginning as a lower high below $1245 per ounce which came also after 1392.20 below 1433.70 per ounce which has been reached on Aug. 28, 2013, after forming a floor of the triangle at $1180.30 on June 28, 2013.

This floor has endured previously retreating to $1182.45 at the ending day of 2013, before carrying the gold up from $1183.15 which has been reached on Oct. 6 to $1255.20 per ounce whereas it has managed to dive its leg below this floor triggering more stop loss orders of the buyers leaving the gold exposed to increasing downside momentum and now in the case of sinking further, it can meet supporting level at $1156.7 per ounce which has supported it previously on Jul. 25, 2010, before 1185.35 which can be followed by $1044.20 per ounce before the psychological level at $1000 per ounce.

While rising up again can be for fixing the current oversold stance and for testing $1180 area as a resistance, while going up further can be met by the psychological level at $1200, before 1235.58 which can be followed by 1255.20 again

The gold has been already depressed by the Fed’s decision to end the QE3 plan last Wednesday unfazed of the rising expectations of watching lower inflation levels in US with the recent greenback appreciation and falling of the energy prices, while EU struggling economy which can shrink in the third quarter can export lower prices to US.

So, the demand for gold as mirror of inflation has dropped significantly.

From another side, the risk appetite could return to the markets bringing the US treasuries yield up making the gold less attractive as a safe haven versus the greenback and the US treasuries which are exposed to have higher yields with returning to normalized monetary policy in US as the economy can withstand it with “a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing” as the Fed said.

After Wednesday FOMC meeting the greenback has not just been supported versus the gold but it has been supported across the globe versus the rival major currencies.

While the Japanese yen was doing the opposite because of BOJ surprising decision to widen its monetary base to 80tr yearly from what is from 60tr to 70tr has been adopted in the first half of 2012 has been till the end of 2014 initially for reaching 2% yearly inflation goal.

While BOJ’s favorite inflation gauge which is CPI Ex-Fresh Food came today to show yearly rising by 3%, after surging by 3.1% in August thanks to the rising of the sales levy in the beginning of last April to 8% which is in the same time forming pressure on the consuming spending in Japan and causes continuous falling of the overall household for the sixth consecutive month yearly, as the figure of September came today to show another slide this time was by 5.6% year on year suggesting a probability of watching further GDP shrinking in the third quarter, after shrinking by 7.1% y/y in the second quarter following GDP growth by 6.1% in Q1.

 

Kind Regards

FX Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

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