-- Posted Sunday, 2 February 2003 | Digg This Article

Gold Futures Report

February 3, 2003

February gold futures closed the month of January slightly beneath the $370 level in an overall erratic week of trading. Gold prices have been coiling in a triangle-shaped pattern between $365-$372 the past few days and have now approached the theoretical point, or "apex," of the triangle and should break out directionally on Monday.

We emphasized the technical significance of the $365 pivotal level, which was prominent in the tick chart as well as the daily chart. We also mentioned that gold remained under pressure from a much larger 4-week parabolic dome in the daily chart, adding that "the selling pressure seems to be dominant and argues against a close above $370 on Friday." Gold was unable to overcome this immediate pressure as expected and closed beneath $370.

Now for the critical question: which direction should gold take in Monday's trading session? Our interpretation of the latest tick charts leads us to guess an upside move on Monday. You'll note from the above chart that a 5-day type parabolic dome in the tick chart was broken late in Friday's (Jan. 31) session, and this should have the effect of lifting the immediate selling pressure and allow for a relief rally on Monday. Note also that gold continues to find support above its 2-week uptrend line, which currently intersects the $368 area. These are the potentially bullish factors weighing in gold's favor for Monday.

Now notice the more detailed version of this same tick chart (above). You can see the bowl in closer detail as well as a 3-day type triangle pattern. Both the lower boundary of this triangle and the rim of the bowl intersect at approximately $368 on Monday, making this gold's immediate support for the day. A penetration beneath this level-confirmed by a crossing beneath the pivotal $367.50-would mean gold is in for a weak trading session. But as mentioned above the odds favor an upside penetration of the triangle. A crossing above $369 would suffice to break the immediate downtrend line and would then allow for a rally up to at least $371-$372 to test the recent highs. The opening part of the trading session should tell the tale.

--Clif Droke

You might be interested in subscribing to Clif's monthly Gold Strategies Review. The February 2003 issue is shipping Feb 3rd. $21 click here for info. It will also be available online Tues Feb 4th

-- Posted Sunday, 2 February 2003 | Digg This Article

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