Pro: Look to Sell Gold on Rallies
iiTrader Founder & Chief Market Strategist
Gold traded to new lows Tuesday, as investors cling to the U.S. dollar ahead of the Federal Open Market Committee meeting slated for Wednesday.
The price of gold hit a high of $1,731.20 overnight, just stretching over Monday's high. Gold's fresh lows early Tuesday signal an outside bearish day. The weakness in gold is apparent, but after it stalled out against resistance at the $1,730 area, I believe sellers have found the path of least resistance to be lower, as equities traded sharply lower after poor earnings. The dollar index traded to a low of $79.535 Monday and found support without breaking a crucial level against previous lows.
(Read More: If US Goes Over 'Fiscal Cliff,' Dollar Could Fly.)
Even with strong buying out of India, we are seeing a fear to bid gold higher, as surrounding markets apply downward pressure. And in terms of the U.S. Federal Reserve's FOMC statement, it is extremely unlikely to see any new easing measures Wednesday, but the verbiage will be closely dissected.
So, how am I trading gold now?
With the 50-day moving average hovering at the $1,725 area, I will be looking there to sell the first test. Only a close back above resistance at $1,732.40 can provide any bullish momentum to this market. As it seems now, the psychological $1,700/$1,690 (Levels should serve as support on the downside.).
Resistance — $1,724.7, $1,732.4**, $1,739.4***
Support —$1,690**, $1,679*