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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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.