Gold Cautious Moving Forward

Loose monetary policies have caused a surge in commodities and stock markets around the world. Part of the surge in gold prices have been attributed to the weakness of US dollar where investors dump US dollars in the expectation that inflation will raise and Gold will better preserve value.

However, US dollar has strengthened considerably this week. For example EURUSD currency pair dropped below the 1.430 level with EURUSD currency pair on Friday’s trading session.

So where is the direction of gold heading?

The phase chart is still in bullish phase. However, warning signs are appearing. The price dropped below its 50 day moving average on Thursday briefly dipping to “Warning” phase. It is still early to talk about a trend reversal at this stage but the price behavior warrants some caution as a drop below its 50 day moving average is a sign that investors may start to take some profits off the table.

China Still In Bullish Phase

Shanghai Stock Index is following a cup and handle pattern that shows a long term upside breakout. The upside target is 3400 which is very near to the Friday’s closing level of 3317.

The phase chart is still showing an uptrend that re-established itself on 19 Oct 09 after dipping below its 50 day moving average.

The next resistance level is at 3400 level and it will take a lot of conviction from the bulls in order to close this level.