Chart of The Week - Gold (Nov 5)

It was not until the United States Non Farm Payroll Report on Friday that traders had a clear idea concerning the technicals in the Gold Futures. Prior to the report, futures prices saw higher lows each day throughout the week and even traded up and outside of the range before failing miserably all day Friday.

To begin the week, Gold saw a lift after better than expected news from China was reported and was coupled with additional easing measures applied by the Bank of Japan. The light buying continued despite concerns in Europe over Spain and once again Greece.

Once the labor data was released in the United States that showed a better than expected number, there was a strong rally in the US Dollar which ultimately led to the demise of Gold and most other Dollar-based vehicles. The word is that traders saw a better than expected jobs number as a reason for the FED to scale back on their commitment to Quantitative Easing. Additionally, traders are awaiting important news this week from not only the United States but also from Europe and a G20 Summit now in session.

This week traders will try to position themselves ahead of the United States Presidential Election, which at this point is anyone's guess. In Europe, all eyes will be on Greece where their Parliament votes on new austerity measures imposed by the Troika and will once again answer any questions surrounding Greece's staying power in the Eurozone. Lastly, member of the G20 are in Mexico today discussing all of the aforementioned topics and more. The last few meetings have produced very little new news, but any major announcements from this meeting could always impact global markets.
From a technical perspective, the Gold Futures dropped to a critical support level that I had mentioned in past reports. You can see on the chart that the support level last week was $1700 an ounce. I did think that Gold Futures would hold that support to close the week. But I also mentioned the fact that if that price was breached, the next support would look to fill a gap on the chart from back in late September. And that is exactly what the market did on Friday and into today's trade. I believe that with little news on the data front to start the week, that traders will likely look to scale into the Gold at this support level. Once the final decision is made in Greece and the United States has chosen a President for the next four years, it will be decided if Gold holds support, or if it targets the next support near $1650.

Gold's reaction to the strong rally in the US Dollar on Friday reaffirmed their inverse relationship to one another. Furthermore, it also indicated the fact that many markets are still heavily reliant on the US FED to continue their Easing campaign. While the fundamental picture in Gold continues to walk a tightrope, the technical picture is a bit more stable. Traders should continue to watch the direction of the US Dollar, and also keep technical support levels in Gold in their sights. Since drifting from the highs of $1800, the market has given a clearly defined range (diagonal lines in blue) to follow. We begin the week at the bottom end of the range and thus far seems to be holding up, which deserves traders attention, whether they are bullish or bearish.