Today’s Federal Reserve Minutes suggested that the Fed may keep rates near record lows a little longer. Over the past few months, expectations were growing that the Fed would begin tightening possibly in June or September. Now the focus will shift to Fed Chair Janet Yellen’s testimony next week. A more cautious tone could continue to support a stronger gold rally.
Price action on the gold daily chart shows that since the bearish butterfly pattern formed on January 22nd, downward momentum has accelerated once breaking below the 200-day SMA. The bearish slide now appears to have possibly found some tentative support from the $1200 handle and is currently testing resistance from the 100-day SMA. If price is able to break above the 50-Day SMA, the next major resistance level will not come the $1,250 zone.
If we do see a massive selloff below $1,190, we may see a quick drop towards $1,170.
The trade: Sell Gold at $1225 with a stop loss at $1,255 and a take profit at $1,170. The Risk/Reward Ratio is around 1: 2
Edward J. Moya
WorldWideMarkets Online Trading