The price of gold has risen roughly $25 per ounce over the past seven sessions, but the technical action remains fairly weak, especially the volume. Concerns about the recession have resurfaced, helping to temper the enthusiasm of inflation bulls.
The Producer Price Index, released this morning, showed a slight 0.3% rise but was not able to spark much of a move in gold prices, which spent most of the session in negative territory. A major reason why the PPI was largely ignored was the 32,000 increase in initial jobless claims last week. Also coming in weeks ahead is the shuttering of automotive dealerships, as GM and Chrysler plan on reducing the number of dealers from 25-33%.Analysts project upwards of 200,000 jobs could be lost if the cuts come out on the high-end of the estimates.
While it is hard for those neutral to ignore the break in the downward trend in prices, it appears that many are still sitting on their hands.Prices may have to rally further to get people excited, and rally with some volume. For those that do get long, stops ought to be set below the most recent lows around $885.The next upside objective is $935 and the longer-term one is up at $998.It could be a slow grind, so traders could consider selling calls against their futures positions and be prepared for some back-and-fill action as the market probes for support.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
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