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Tapering priced in for now?

Safe-haven buying appears to be slowing as the world's largest economy shows signs of recovery.

The anticipation of the Fed reducing quantitative easing measures has been one of the significant catalysts for the weakening of gold, with safe haven buying of the precious metal slowing.

Interestingly enough, positive jobs and unemployment numbers out of the US last Friday failed to result in significant selling of the commodity, as has been the case in previous meetings. The market has perhaps become accustomed to the idea in the near-term and priced in what it deems to be fair for now. 

Shedding more than 35% from its all-time highs in September 2011, there is no doubt that the long-term trend remains down for spot gold. The chart below uses a simple 200 day moving average (blue line) as a gauge of that long-term trend with the price remaining firmly below. However, technical indications hint at a possible near-term change in direction. 

The price on a daily chart has formed a falling wedge formation which alludes to a short-term loss in the downside momentum and in turn suggests a possible rebound. Supporting the price pattern, we find our oscillator (Stochastic) trending up out of oversold territory and showing a bullish divergence with the price. This type of divergence is formed when the lows of the oscillator are rising and the lows of the price are falling.

Favoured targets from the above indications are located at $1260/oz. and $1295/oz., while failure of the indications will be considered if the price starts trading below $1200/oz.

Spot Gold chart - 09 December 2013

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