Previous: NFP – Reactions in Gold and Silver Reflect QE3 Expectations (9/7)

XAU/USD 1H Chart 7:20AM EDT 9/13/2012

Gold reflects QE expectation: Last Friday’s poor NFP data was accompanied by a sharp rally as seen in the 1H chart. It has since mostly consolidated, though a new high was made on 9/12. However, this rally was quickly dragged back into consolidation mode as the market holds back ahead of the FOMC policy meeting Thursday, 9/13 2:00PM EDT (18:00GMT).

Consolidation: The correction held above the previous support pivot at 1724.46, and basically sets up a range (given some elbow space) roughly between 1720 and 1750. You can see that even within this range, the market has lost volatility sitting quietly on the 1730 handle. While the market is sideways in the near-term, it should be noted that there is bullish momentum stance as the RSI still remains above 40.

QE3 affirmation: After the Fed meeting and announcement, if gold pushes above 1750, we have the 1790.20, 2012-high as the next target. There is also a pivot at around 1762. These levels can be seen in the daily chart.

XAU/USD Daily Chart 7:10AM EDT 9/12/2012

Disappointment scenario: Looking at the 4H chart, We see that a break below 1720 should establish at least a short-term top, which opens up the 1700 handle. If subsequent pullbacks can’t break into the top (the range 1720-1750), then it is possible there is further correction. For now we should limit the bearish, disappointment outlook to 1650, where the 200-4H SMA reside. This reflect a regression back to the mean price action since the bull run that started  in August.

XAU/USD 4H Chart 7:11AM EDT 9/13/2012

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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