Gold testing a key uptrend line - technical outlook

Tracking risk appetite across bipolar asset markets

THURSDAY JANUARY 31, 2013       17:18:00 GMT

Spot gold prices are preparing for their fourth test of a key uptrend line on the daily chart which extends back to May of last year. From a technical perspective there is some evidence of a positive divergence on the MACD chart which suggests that the momentum to break below this trendline may have dissipated. On the contrary the failure to re-enter the cloud formation above the current price is a negative and the daily price has failed already to regain a footing above the 200 day EMA (the green line on the adjacent chart) and the 50 day EMA is approaching the longer term 200 day EMA setting up a possible bearish crossover.

The price performance in the near term is quite significant for the intermediate term outlook for the metal. The most favorable outcome for the bulls would be a successful re-test of the 1625 intraday low seen on January 4th as this coincides with the lower 20 day Bollinger band and also the base of the weekly cloud formation. If that level is broken then a more sizable and enduring correction towards the 1500 level is feasible.