Gold prices rallied during early US session, most likely driven up by risk aversion and fears of the Government Shutdown/Debt Ceiling impasse that sent stock prices lower. Prices stayed supported above 1,315 despite not able to clear the 1,320 soft ceiling. However, the fundamental reasons for the rally may be over. There have been reports saying that more than a dozen House Republicans have spoken with House Speaker John Boehner, requesting that Boehner allow for the Government to be funded again. Even if Boehner doesn’t comply, should the group grow to 20, they will be able to pass a clean bill if all House Democrats join in.
Not that they’ll need it though, Boehner has given his personal word that US will not go into a default, which is a much bigger pressing issue than whether the Statue of Liberty is available for tourists. Hence there is really no reason to go into a panic and buy gold. It seems like we will see business as usual beyond 17th October and once that is confirmed, it is likely that Gold prices will come down once again.
Technicals suggest that bearish pressure remains, with the immediate target the descending trendline and confluence with 1,305 swing low support. Stochastic readings agree with readings pointing lower after bouncing lower from the “resistance”. Considering that we do not have any scheduled US news coming out today (due to the partial Government shutdown), we may not find strong driver that can drive prices strongly either way. As such, the likelihood of 1,305 holding if we tag it today remains high.
Weekly Chart shows sign of weakness in the bearish momentum as prices with the gradient of Stoch curve flattening slightly just when a resounding break of the 60.0 mark is required. However, as long as price trades below the 1,330 – 1,345 consolidation zone and preferably stay below the 1,325 level closing level of the Doji Candle 2 weeks ago, bearish pressure will remain.
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