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Comex Gold Range-Bound But Near-Term Technicals Described As Constructive

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(Kitco News) - The short-term technical-chart posture of the gold market looks constructive even though the metal has been in a relatively tight trading range since a big up move in mid-June, traders say.

The most-active Comex August gold futures contract surged ahead by $41.40 on June 19, when it reclaimed $1,300 an ounce. Since, the market has ranged from a low of $1,305.40 on June 25 to a high of $1,334.90 on July 1.

As of 10:14 a.m. EDT, August gold was $7.10 higher to $1,323.60 an ounce.

That consolidation after the sharp gains of June 19 means a “bull flag” formation has formed on a daily chart, said Frank Lesh, broker and futures analyst with FuturePath Trading. There is a trading axiom that when a market turns sideways after a big move, more often than not, it eventually resumes the same trend whenever it breaks out of its range.

“The market is working higher,” Lesh said. “We had the big gain and are consolidating the gain. We have certainly have an upside bias here.”

Charles Nedoss, senior market strategist with LaSalle Futures Group, pointed out that the 20-day moving average, which came in at $1,305.90 as of mid-morning, has now crossed above the 100-day of $1,304.70.

“You’re starting to attract some new buying and life back into this market,” Nedoss said. “I think it (Wednesday’s gains) is more technical in nature than anything else.”

The key chart level for gold to hold will be the area around $1,305-$1,306, basically around the late-June low, said both Nedoss and Lesh.

“If we turn around and sold off $20, I think the charts would still look constructive,” Nedoss said.

Meanwhile, the July peak of $1,334.90 is seen as the key short-term resistance level.

“I think above that, you stop out the short crowd and you start to turn on the tech money coming back in,” Nedoss said. In particular, there is an area where traders who have short positions, or bearish bets, might have pre-placed buy stop orders to kick them out of a position that starts going against them.

Above the July 1 high, Lesh listed the next resistance levels at $1,352 and $1,368.

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By Allen Sykora of Kitco News; asykora@kitco.com