Gold prepares for FOMC and Options Expiration in the coming week by Bill Downey

Gold Chart

Let’s focus in on the pattern since it became impulsive to the upside and set a channel equal to the upside momentum so far. The upper channel line is in the 1315-1325 area and the lower channel around the 1240 area. The channel line area at (upper) 1282-1285 is current support. Note how both the Thursday and Friday low are at this line. More important this is at least the fourth, and perhaps the 5th test of the 89 hour moving average. PRICE MOST CLOSE ABOVE THE AVERAGE to maintain current short term momentum. A close below the 89 hour along with a close below the mini-channel line favors a test of the green 200 hour moving average, which if you’ve been keeping track is at 1272 (the WEEKLY REVERSAL) number. Any close below 1270 and the short term trend goes from Bullish to Neutral and will favor a test of the next line in the 1255-1260 area.

Gold short term (con't)

On the upside we now need a close above 1305 to favor that gold can make it to 1322-1332. It won’t surprise me to see gold trading near 1295 at the Globex close. A close below 1295 is the 1st warning signal to be cautious. Since the 89 hour Ave has been providing all the tests on this rally it’s the best place to watch and use as a short term pivot.

The bottom line is the market awaits the Greek election this weekend, and preps for the FOMC Meeting and Options Expiration next week. Watch that 1285-1295 area and 1272 on the downside for support for now. A close above 1305 favors upside is still in play.

Cycles
The next short term cycle begins today and runs into Feb 3rd (plus or minus 72 hours). If cycles keep acting as they have since October (red cycle high – blue cycle low) then the odds favor gold pulls back into the next blue cycle (Feb 3rd) and makes a low. That would be right in line with the Chinese New Year (Feb 19th) at the next Blue Cycle high. The most likely pullback would be in the 1255 area (plus or minus 10 bucks) or the 1222 area (plus or minus 10 bucks into Feb 4th.)

Any new weekly high after this Monday will favor a cycle inversion and higher prices for two more weeks. The next medium term cycle (green) is March 23rd (Plus or minus 2.5 weeks).

If things play out like they usually do, gold pulls back in the coming week for FOMC and options expiration. That has been its character during the bear trend we have been in. Now to see if it plays with the odds (70%). The overall intermediate term trend remains up at the moment. It's the short term we discussing a pullback from.

Silver
Resistance for silver is 1900 (plus or minus 25 cents) and 2050 (plus or minus 25 cents). Support is now 16.50-16.80 and the 17.25 area. It takes a close below 18 for the 1st caution shot and a close below 1725 to neutralize the short term bullish reading.

(Metals summary after silver chart)

Metals Summary

Medium Term

The most likely time for highs in Q1 is Jan 19th (plus or minus 72 hours), Feb 19th (plus or minus 72 hours) and March 19th (plus or minus 72 hours).

Short term

With that said, a pullback to Feb 4th would be healthy and keep cycles aligned and well as tests of support and resistance and would favor higher prices as long as we don't close below 1222 on a weekly basis.

Any new weekly high after this coming Monday favors another two weeks higher.

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