Monday, September 28, 2009

Gold Consolidates Beneath $1000/oz.

Gold is balancing above 9/10 lows and June 2009 highs, yet remains below the psychological $1000/oz level. Gold appears to be taking its cue more from the performance of the EUR/USD and U.S. equities, which are trading the bottom of their near-term uptrend zones. However, rapid deteriorations of both the GBP/USD and USD/JPY are certainly causes for concern. Since the large pullbacks in the Dollar crosses are predominantly based on psychological factors, gold’s correlation is favoring the more fundamentally-based performances of the EUR/USD and U.S. equities. Hence, gold has managed to stay within range of the $1000/oz level despite recent volatility in the FX market. As a result, gold’s near-term performance will likely depend upon the results of key U.S. economic data this week. If global economic data continues to underperform gold may be forced to sacrifice 9/10 lows. That being said, we’re a bit skeptical about upcoming data releases. Therefore, we believe gold has a downward inclination over the near-term.

Investors should keep eye key technical supports of both the EUR/USD and the S&P futures. A technically significant decline in either of these investment vehicles would likely be accompanied by a large selloff in gold. Intraday and 9/10 lows should serve as reliable technical cushions for gold along with our 3 uptrend lines. As for the topside, gold faces formidable resistances in our multiple downtrend lines and the highly psychological $1000/oz level. We maintain our neutral outlook on gold trend-wise due to the mixed picture across the marketplace.

Present Price: $992.15/oz

Resistances: $993.14/oz, $995.13/oz, $997.20/oz, $998.94/oz, $1000.39/oz, $1003.44/oz

Supports: $993.14/oz, $990.96/oz, $988.78/oz, $987.03/oz, $985.25/oz, $982.93/oz, $980.61/oz

Psychological: $1000/oz

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