Gold Traders Eye Swiss Vote, Downside Limited For Now
February Comex gold futures are consolidating quietly in early Monday action, following two consecutive weeks of gains. In the short-term, uncertainty ahead of the Swiss gold initiative vote on November 30 will limit downside in gold. Technically, a short-term bottom has formed at the November 7 bullish reversal low at $1,132 per ounce. 
Figure 1 caption: This chart shows a weekly continuation chart for gold. A near term bottom has formed at $1,132 basis the February contract. Gold has posted two consecutive higher weekly closes. Also, gold prices are consolidating back above the old "breakdown zone around $1,183-$1,182 on the weekly chart. The late October-early November selling action was a short-term bear trap.
The very short-term trend pattern has improved with a minor stair-step pattern higher. Also, February gold is trading above its 10-day and 20-day moving averages, which is a bullish signal. Resistance is seen at the declining 40-day moving average, which comes in at $1,204.20. Watch that resistance point early in the week. If gold bulls muster enough strength to rally the market above the 40-day moving average it would generate additional buying interest and bullish momentum.
On the upside, strong resistance and a major bullish target lies at the October 21 swing high at $1,256.20. That zone may remain out of reach in the very short-term, as traders await the results of the Swiss gold initiative. But, if a yes vote is achieved that will be a target for gold bulls. A sustained and strong close above the October swing high would be needed to significantly improve the medium term outlook for gold.
On the downside, initial support lies at $1,174.70, the November 19 daily low. If short-term declines are seen under that floor it would be a weak signal and would break the minor daily uptrend pattern. Sustained declines under $1,174.70 would open the door to a retest of the $1,146.90 level and then the $1,132 zone.
Bottom line? Near term, the gold outlook has improved. But, gold does face stiff resistance at the 40-day moving average. Sustained strength is needed above the 40-day moving average to generate additional bullish momentum in the short-term.
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