2012-10-31 15:50:46Roosevelt

Gold's Technicals Brighten as October Winds Down

 Gold is narrowly confined as US markets remain largely closed in the wake of Hurricane Sandy. The overall tone for October has been defensive however, after the QE3 driven rally faltered ahead of $1800 early in the month. Oh how quickly markets become disillusioned by open-ended quantitative easing these days...

While the Fed has more ammo to expend in its seemingly unending effort to distort markets; and in fact a recent Bloomberg survey showed that all 21 primary dealers believe the central bank will relaunch outright Treasury purchases before year end. Maybe that's exactly what the market is waiting for. A weak jobs report on Friday may prove to be the catalyst.

Capital Economics also noted today that "The boost to risky assets from QE3 may already be over." They went on to say, "We think tougher times lie ahead for risky assets," adding that, "This should be good news for US Treasuries and gold."

You can find a little encouragement in gold's technicals: The magnitude of the correction has been well within expectations, with the 38.2% retracement level of the recent rally well protected at 1693.10. Recent tests of the downside have left a small double bottom at 1698.60/1700.71. Additionally, the 100-day moving average crossed back above the 200-day moving average on Friday's close, the first time that's been the case since March.