(Kitco News) - July 28 —Last week's action saw December Comex gold futures fall to test its 200-day moving average, but that important long-term support zone held. In the near term, gold remains in a choppy, corrective phase, but continues to hold above key moving average and Fibonacci retracement support zones.
This week's action could see volatile trade amid a number of key economic releases in the U.S., but emerging geopolitical uncertainties should help keep a bid underneath the market.
Take a look at Figure 1 below. December gold has held above both its 200-day moving average (in red) and a 61.8% Fibonacci retracement of the June-early July rally move. Watch support in the $1,289/1,281 region. If a sustained downside breakout is seen below that zone this week it would be a short-term bearish signal. If that zone gives way on a closing basis, the bears could take a run at the early June low around the $1,241 zone, which is a strong support floor.
Currently, momentum studies are mixed and are not revealing a strongly trending market. A lot of the action on the daily chart is "noise" or a lack of a strong trend right now.
Gold is being buffeted back and forth by concerns about a better economic picture here in the U.S. and what they could mean about the timing of Fed rate hikes versus on-going concerns about a variety of political and military hot spots around the world. Heading into August, light liquidity and summer doldrums could invite more choppy, whipsaw type of trading action.
Longer-term players are generally not involved at these levels —in the middle of a large range. Since December 31, 2014, Dec Comex gold has traded from $1,185-$1,390.80. That is a large multi-month range. Gold is trading in the upper half of that range, which is a positive signal. But, for now, the choppy mid-range prices generally aren't of major interest to long-term physical buyers.
Trend following traders will be monitoring the 200-day moving average. Sustained strength above that important long-term moving average would be perceived as a bullish indication. Conversely, a sustained trade under that zone would be seen as bearish and would open the door for a retreat to the lower portion of the range.
In choppy, illiquid summer trading conditions, it is important to know and trade your timeframe. If you are a scalper/day trader—book your profits quickly and go home. Swing traders will find a more challenging environment currently as the chart is not showing a strong near term trend. And, longer-term traders are mostly on the sidelines now.
As always, look to the charts to find your levels. Right now, the $1,289/1,281 region is important support. We could see some fireworks this week as continuing geopolitical uncertainties develop and amid a spate of economic data from the U.S.
Plan your trade and trade your plan.
Kira Brecht is managing editor at TraderPlanet.
By Kira Brecht, Kitco.com
Follow her on Twitter @KiraBrecht
