We are trading very well at the moment. We have repeatedly warned about the Australian dollar and our downside targets against CAD and USD have been met. We were impressed by the continued weakness against the euro today and it looks like the bearish phase in the euro against the commodity currencies might be coming to an end.

Today, we want to focus on gold. For years we have been skeptical of gold bugs and their prognostications of $5000 gold. It’s a group that’s filled with conspiracy theorists and worry-mongerers.

In the last siz months, however, we have grown more and more convinced that the gold rally is just getting started. Sovereign debt worries are for real and many countries will eventually give in to inflation as a solution to their overspending. The implications are unambiguously bullish for gold.

After reaching all-time highs last week, gold has slumped. For us it’s not a matter of buy or sell, it’s only a matter of when to buy and when to take profits. At the moment we are looking for buying levels.

We see that the RSI has fallen into oversold territory but it could still fall lower. On the downside we have the fibonacci lines at roughly $1170, $1150 and $1120.  We also see various trendlines with the most meaningful one (to us) at $1140 currently. On the whole, we see a great deal of support in the $1120 – $1170 range but support thins out below that.

We will be stacking up buy orders in this range on the possibility of a quick spike toward the bottom of the range. If we see a fall below $1120 we may be forced to reconsider.

The short-term trend in gold has been higher but the medium-term trend is lower. This is complicated because the long-term trend is undoubtably higher.

Everyone has an opinion about where gold prices are going. We look to the charts for answers. At the moment, gold is approaching several resistance levels that converge and will make it very difficult to see further short-term gains.

As we can see, there is downtrend resistance as well as the 50-day moving average at $1,112 and the 100-day moving average at $1097. The rally from $1045 up to $1095 has also put gold in a short-term overbought position. The silver and oil charts are also looking stretched.
We favour selling gold at this point but we would certainly cover (and potentially go long) at $1112.

We have seen large rallies in gold in two of the past three sessions and we are prepared to say that the correction in gold has run its course and that the commodity is ready to resume its rally.

Gold Daily Since Oct.

Gold has rebounded after correcting from the all-time high of $1226 to $1070, which was just over the 38.2% retracement of the move from April to December. The correction was a healthy one, even if many would have liked to see something in the upper 900s before going long once again.

The rally in gold is one of the strongest trends in any market and the signal over two of the past three days has been solid. There is upcoming technical resistance at $1141.52 but if that is breached a re-test of the all time high is the favoured scenario.

Our chart shows the RSI, Bollinger Bands and Slow Stochastics. The RSI is bullish, it has risen to 60 after basing and it won’t be historically overbought until were in the mid-80s. The Bollinger Bands had contracted and now were are pushing against the upper Bol after a correction to the bottom. Look for it to ride the upper Bol like it did in Nov. The Stochastics do give some reason for pause, as we are already looking stretched but overall, the trend looks good.

Today I want to talk about the silver (also known as XAG).  We are all aware that it is part of the commodities in the forex market. While I was traveling around the world this year, I met with many jewelry traders, most of them told me that they believe that 2009 will be the year of the silver and less of the gold. We all remember how a few years ago a few announcements affected the market in regard to the silver.  We also saw how the price of oil affected the USD over the last several years.  it looks like since the recession began and during the recession the commodity market became more and more unclear to analyze and find a trend to follow.

Coming back from my trip around the world, a smart man told me, that the longer the recession will continue the larger the demand for silver will be.

Let’s begin analyzing this pair. When we look at the silver from a few different points of view, we see a few different trends that we can analyze.  When I want to see what happened with the silver I will open a daily chart, there I will have the ability to analyze the previous buying and selling rate of silver and with that information I am able to determine a clear trend of movement for the silver during the previous trading day. From that point it is much easier to find a clear trend and determine the direction the silver is heading into whether an uptrend or a downtrend.

When viewing the daily chart, I can always find a clear trend for the silver.  However by viewing the strength of the USD against the major currencies I can also find a trend for the silver, since the silver is exclusively bought in USD. Let’s see when was the last time the market reached the same market rate; the last time this happened was August 4^th, 2008.  Clearly we want to know until when the silver will continue moving in this uptrend. For that we will need to keep on looking for the support and resistance lines as it reaches certain market levels.

Resistances-17.4200-17.7000

Supports-16.9600 – 16.700