Gold and Commodities Respond to QE Expectations

Author Larry Berman

Posted: 30 July 2012 re-posted from etfcm

So commodities are bouncing a bit based on the expectation the ECB is about to launch a major QE effort to reduce borrowing costs in Spain and Italy. Gold has responded by breaking out above a 4 month trendline of lower highs and should be able to test the upper resistance in the $1655 to $1690 range. The 200-day average is at $1655, but it is not seen as an important level. The 50% retracement from the Feb high to the May low is at $1659 with $1690 the 61.8% retracement. The declining trendline of the 2011 and 2012 highs projects into the $1680 area today and is declining at about $1 per day.

Gold stocks continue to see significant earnings impairments from exponentially rising costs, so if gold cannot make a material move above this overhead resistance, gold stocks are unlikely to do much better than a retest of nearby resistance areas either. NEM missed big today just like ABX did yesterday. However, seasonals are bullish for the sector for the next few months, so a buy dips bias makes sense.


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