Gold After QE3 Analysis

Gold After QE3 Analysis

Following up with the previous update from Thursday (8/29), gold did indeed break below a short-term rising trendline, but remained above an anticipated support at the 1640.60 pivot. It was declining in a flag pattern as shown in the 4H chart.

Bernanke’s speech at Jackson Hole this Friday (8/31) was interpreted by most media outlets as a stronger push for QE3 than before. This should hurt the USD against the JPY, commodity currencies, and boost commodities priced in USD like gold (XAU/USD).

Indeed, we saw gold surge out of the declining flag pattern to touch new highs for August. This breaks into the direction of a short to medium term uptrend that just recently broke above a key descending triangle resistance trendline. This rally acts as confirmation after a throwback. Also note that the 4H RSI held above 40 after retreating from above 70, and is now attacking 70 again. The price action and momentum reflect bullish continuation.

The zoomed-in chart of the daily candles, show that the upside break opens up the 1700 handle, and more aggressively the 1790 pivot. But first let’s focus on 1700. There are still the NFP next Friday (9/7), and the next FOMC meeting Thursday (9/13) as risk events. These will be needed to fuel gold truly clear 1700 toward 1790 if they indeed point to QE3.


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Fan Yang CMT