Hourly Chart
Gold prices rallied strongly yesterday, rebounding off the rising trendline that has been in play since the dip of 4th December. However, prices were unable to climb above the highs of Friday, underlining the broad bearish pressure that Gold has been experiencing in 2013. Nonetheless we may have a bullish breakout on our hands right now with prices trading above the descending trendline. The only problem is that current rally is again not inspired by any fundamental news and may just be yet another bullish push due to a handful of large players buying - a move that is not going to be sustainable. Price will rally certainly, but do not expect long-term rallies out of this.
This notion is furthered by the fact that current prices have yet to even overcome the swing high of a few hours ago, not to mention the highs of last Friday and Thursday. Even if the price manages to climb all the way up, there will be further resistance waiting in the form of 1,255 which was the ceiling 2 weeks ago. Therefore, we have a long way to go before overall sentiment can reverse from bearish to bullish, and bulls will definitely need favors from fundamental news to aid in this journey.
Weekly Chart
The Weekly Chart is kinder to the bulls with the Stochastic curve appearing to be bottoming out. However, it should be noted that price has yet to tag the Channel Bottom, and hence overall bearish momentum may still have some room to go and once again price will need to push above 1,250+ in order to invalidate current bearish momentum.
Fundamentally, yesterday's bullish rally in the face of hawkish remarks from Fed members Lacker, Bullard and Fisher shows QE Taper/No Taper may have lost influence in the market. This would have been a bad sign for bulls if this observation was made 2 weeks ago, as the Fed was expected not to taper in December, which would have helped propelled gold prices higher in the short-term after the FOMC meeting. However, there are more and more speculators and market watchers that believe that a cut in December may be possible, given the stronger than expected GDP, ISM Manufacturing and job growth. Not that this will matter though, as price may simply be muted judging by the way prices reacted yesterday.
Of greater concern are the sudden rallies in the past week that have yet been adequately explained. It seems that large financial institutions are still stocking up on Gold, but without names and identities it is difficult to determine if there will be more of these purchases in the near future. Certainly we know that such activities cannot last forever without broad market support, but these flash rallies do scare short sellers and we may not see firm bearish conviction until such flash rallies disappear.
Commitment of Traders numbers this week will help shed some light on institutional flows, but between now and this Friday it is unlikely that there will be sustained bearish pressure with uncertainty in the air.