Technical Outlook Near Term

Mon March 28--April gold futures etched a marginal new all-time high on the daily chart last week, with the March 24 push to an intraday high at $1,448.60 per ounce. However, the bulls failed to defend the push to those higher levels, as the market closed slightly lower that session. Follow-through selling tugged prices even lower March 25.
In the very short-term, the bulls are on the defensive in the gold market. A sloppy, but potential "double top" pattern is seen on the daily chart, from the March 7 and March 24 daily highs. In order to actually "confirm" the bearish potential of that possible pattern a close would be needed below the intervening low or in this case the March 15 low. While that is not the near term forecast, traders simply should be aware of the possible double top.
A look at daily Bollinger bands reveals that through last Friday, the market remained trapped between the upper and middle Bollinger line. The middle line, currently around $1,421.80 will be important to monitor very short-term. If the bears were to press the April gold contract under the middle Bollinger line, it would open the door for near term declines toward the lower line, currently around $1,396.30.
The daily relative strength index (RSI) remains negatively positioned for the very short term, which could support any near term bearish attempts.
Looking at the gold market from a top down approach, the longer-term primary technical trend remains solidly bullish. However, in recent months, the intermediate term trend has shifted into a neutral or sideways bias.
Since November 2010, the gold market has largely moved sideways within a large intermediate term trading range, though early March did see the bulls press the top of that range to marginal new highs just below the $1,450 zone. Very broadly speaking, one could define the medium term range between $1,450 and $1,309.10, the January 28, 2011 low and the lowest price traded since late September 2010.
Markets very often shift into sideways consolidative types of modes as a form of "correction." From late July 2010 into early November 2010, gold bulls thrust the market sharply higher over that several month period. Several months of subsequent sideways or consolidation action is not a surprise and can actually be healthy for the longer-term bull trend.
Finally, drilling down to the very short-term trend for April gold, the near term bias is down in the wake of the retreat off the new high seen March 24. Very short-term gains would be needed back above $1,438.10 to target a retest of the $1,448.60/1,450 zone.
If short-term support at $1,419.50, the March 22 low is broken, the gold market will be vulnerable to additional minor near term declines, with major support at the March 15 daily low at $1,380.70.
Jim Wyckoff  exclusive to Kitco

Lets Get Physical......just not yet

Whether or not the Libyan situation does not come to a quick resolution, the attitude on display by the US Fed is that it (or at least four of its member presidents) is in no hurry to extend or expand the QE2 program. Messrs. Fisher, Plosser, Lockhart, and Evans are all of the opinion that every good thing eventually does come to an end, especially if the risk it entails outweighs its benefits. The FOMC meets one week from today to discuss all of this, and more. The post-meeting language is likely to be parsed with at least as equal a degree of intensity as was the one that was issued in early November of last year, when the good ship QE2 was set sailing on the US economy’s rough (at the time) seas.

The trend towards hiking interest rates is hard to miss, (but by a few holdout commentators who envision “easy money” as basically an everlasting proposition, and one which will perpetually fuel “To Da Moon!” spikes in commodities). Bloomberg reports that The Bank of Thailand and Bank of Korea will each raise key interest rates this week by a quarter percentage point. As well, Malaysia may also be approaching the end of its pause in boosting borrowing costs.

Such moves will come on the heels of seven already-in-place hikes by India’s central bank and by a recent string of similar tightening actions by China’s PBOC. This coming weekend may also bear watching as China announces inflation levels and possibly what it might do about them. Of course, the 900-lb gorillas at the moment remain the ECB and the Fed. When they too commence this campaign, well…let’s let someone with long-standing market experience frame that concept at this time: Value View Gold Report’s Ned Schmidt.

Says Mr. Schmidt in his latest “Gold Thoughts” issued on Monday: “Gold is today the preferred precious metal when compared to Silver. That might not, and likely will not, prevent it from going down when the Federal Reserve folds in June. That June time period is becoming of increasing importance. The current era of free money, quantitative easing, by the Federal Reserve is scheduled to end in June. Should the ECB raise rates in April, Federal Reserve will come under increasing pressure to abandon free money policy.

Mr. Schmidt, a 30+ year veteran observer of precious metals markets (and one whose ultimate price targets for gold are actually quite lofty, BTW) also correctly notes that: “Free money has been driving financial markets. Should that era of free money begin to end in June, considerable realignment of investment market values seems likely. Silver is simply the most obvious one. Deferring the investment of idle funds, and perhaps taking some profits, might be wise until the June poker hand has been played.”

Such level-headed caution is closely related to the observations tendered to the UK’s Telegraph this morning by at least a couple of UK financial advisers; Messrs. Patrick Connolly, of AWD Chase de Vere, and Martin Bramford of Informed Choice. Mr. Connolly notes that "there continue to be bullish statements and bold predictions about gold and the assumption that the returns seen over the past decade are now the norm. There were similar sentiments in 1999 about technology stocks, and the belief that the only way was up. It's easy to forget that gold prices can go through prolonged downturns. During the Eighties and Nineties, the price of gold fell by 70 percent" while Mr. Bramford opines that "investors are understandably concerned about inflation at present. But there is a real risk that those now buying gold are doing so at the top of the market and will end up making losses when prices fall."

So much for the “this time it’s different” propositions in (over)abundant supply out there. The only difference is that the Internet has now made it possible for practically everyone to be heard, whether or not they have something of value to offer.