*Gold* - Negative view, Lows below $1,400,
Nearby Gold Monthly Analysis for March 2013
Posted March 01, 2013
James Hyerczyk
Nearby gold futures extended its loss during February as investors continued to dump the precious metal in favor of the better performing and higher yielding equity markets. With the Fed supplying the market with all the cash that it needs, stocks have clearly been the investment of choice for investors since March 2009. Gold began to fall out of favor with investors in September 2011.
Another reason for the break in gold is the absence of uncertainty. Investors are moving money into stocks with clarity and conviction. With inflation under control and interest rates expected to remain at historical lows until at least 2014 and maybe 2016, gold is no longer an investment or a hedge against worry and fear.
Monthly Nearby Gold Chart
Technically, nearby gold futures is poised to drop even further in March if a long-term uptrending Gann angle at $1578.20 is penetrated with conviction. This angle has held since the bottom at $730.20 was formed in October 2008. A break of this angle should lead to an immediate test of the May 2012 bottom at $1538.30. A move through this level will turn the main trend to down on the monthly chart.
Based on the main range of $730.20 to $1946.90, expectations are for the market to eventually reach a major retracement zone at $1338.55 to $1194.98. This zone is not likely to be reached in March but should serve as a good target for those who want to hold short positions for a long-term move.
This month, resistance comes in at $1642.70 and $1658.90. Rallies back into these price levels are likely to attract fresh selling pressure.
With Fed Chairman Bernanke reiterating his stance that the central bank will continue to buy mortgages and bonds until the unemployment rate falls to an acceptable level, Investors have no incentive to buy gold. This means that downside pressure should continue throughout March.
If stocks continue to rise and investors continue to favor the U.S. Dollar during periods of uncertainty, look for gold to break until it reaches the major value area at $1388.55 to $1194.98.
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