The spot price of gold formed an evening star Thursday – Monday sessions singling a return to the bottom of the trading channel.
Gold (GLD, quote) prices pushed of the lows of the channel (albeit a small move) as clarity continues to remain cloudy on weather a Greek bailout will materialize. As we approach the June 30 deadline its looks as both sides are continuing to call each other’s bluff. A default of 1.6 billion euro to the IMF could begin the process of Greece’s exit to the euro zone but it’s not in the interest euro zone members such as Germany to allow an exit.
On the flip side, gold prices have downward pressure from Federal Reserve as market participants try to read the Fed tea leaves surrounding the first rate hike in decade. As gold traders eye higher borrowing rates on the horizon which in turn will strengthen the U.S. dollar and add additional pressure to gold prices, we could see a break of the channel, however, the channel is in control until then.
Bottom Line: Gold is likely to continue within the channel and I want to look to play gold to the upper in the channel after I see a bullish candle formation.