Thursday, 19 March 2009

Gold performs major intraday reversal after FOMC statement

One of the most spectacular reactions to yesterday’s FOMC decision was seen in the precious metals, in particular with gold. The ETF which tracks the spot price of the metal, GLD, staged a massive reversal and as the very large green candlestick on very heavy volume suggests there are many traders that are sensing the growing inflationary threat - over the longer term - of the QE policy.

A couple of weeks ago I expressed the view that the gold chart is tracking the evolution of an inverse head and shoulders pattern with a possible neckline break of the $1000 level leading quickly to $1350.

With yesterday’s move the pattern is still unfolding along those lines and even a pullback towards yesterday’s lows would, if not seriously violated, lend further conviction to the pattern.

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