by Richard Rittorno
Traders continue to focus on new guidance from eurozone policymakers ahead of the European Union summit. Monday, France and Germany started the process of fiscal integration, which might be the first step in convincing the ECB to step up bond purchases and move appetites back toward risk — and oil. After weeks of becoming numb to euro speculations, markets did not fully price in the move from the fiscal integration agreement before news broke that rating agency S&P placed most of Europe, including six of the remaining AAA-rated nations, on negative credit watch pending the outcome of the euro zone summit.
Neither headline may prove to be short-lived.
Many analysis feel S&P is late with its warning and the fiscal integration agreement contains its share of flaws.
Meanwhile, the oil market is moving negative again as it digests the headlines.
On the technical front, price action Monday created a Dark Cloud Cover candlestick pattern below resistance at $103 after a retest of the upward channel bottom established in October.
The pattern is suggesting a move lower ahead. Initial support comes in around $94.
Traders can gain exposure to the oil market through the United States Oil Fund LP (USO), which seeks to reflect the performance of the spot price of West Texas Intermediate (WTI) light sweet crude oil through the futures market.
Will the advancing U.S. stock index bode well for gold?
Traders are looking for signs of a shift away from the safe-haven U.S. dollar, which would offer a lift in the shiny metal by way of its denomination in terms of the benchmark currency.
As mentioned above, the gold market is still shaking out sentiment trends and traders could see a sharp reversal at any given point. A watchful eye needs to continue as traders continue to jump from headline to headline ahead of the euro zone summit set to begin on Thursday.
Price movement Monday was lower for Comdex gold following the formation of a Shooting Star candlestick below resistance at $1,746.
Near-term support continues to remain at $1,711, which is also sitting at the 23.6% Fibonacci level reinforced by a rising trendline.
A break below this support exposes the 38.2% Fib at $1,654. The $1,746 level continues to act as immediate resistance.
The SPDR Gold Trust (GLD) is a great way to gain exposure to the gold without risk futures contracts. The GLD seeks to replicate the performance of the price of gold bullion. The trust holds physical gold to maintain its holdings.