Gold Weakens with a Stronger Dollar.

Gold failed to breach September highs yesterday, and the precious metal is declining as investors snap up the Dollar. Investors are presently making a slight retreat from risk as they await the Fed’s monetary policy decision later today. While we expect the Fed to keep its policy unchanged, the potential for a monetary shock always exists. Meanwhile, the EU’s PMI data came in negatively mixed today, catching investors a bit off-guard. The disappointing data has resulted in a comparatively weak Euro. Underperformance in the Euro is dragging gold lower since the precious metal has recently experienced a stronger positive correlation with the EUR/USD than the GBP/USD. The S&P futures are hovering around even, and gold will likely remain within a reasonable trading range until the Fed announces its decision. We maintain our positive outlook on gold trend-wise since we are optimistic about the precious metal’s correlations over the near-term. Additionally, gold has given us little reason to question the uptrend’s technical strength.

Technically speaking, gold’s psychological $1000/oz area should continue to serve as a strong support. Gold’s continual defense of $1000/oz is a positive sign for the uptrend since the precious metal is building a solid technical base. Gold has multiple uptrend lines along with 9/21, 9/15, and 9/10 lows serving as technical cushions. As for the topside, gold is staring down previous 2009 highs and our relatively flat 3rd tier downtrend line. Beyond these technical barriers, gold faces the final frontier in March 2008 highs. These technical levels are the only foreseeable obstacles separating gold from more exciting near-term gains. However, gold will need a strong push to the topside backed by healthy volume. Therefore, the precious metal will require participation from its correlations across the board.

Present Price: $1011.55/oz

Resistances: $1014.88/oz, $1016.56/oz, $1018.24/oz, $1019.79/oz, $1020.86/oz, $1024.48/oz

Supports: $1011.51/oz, $1010.39/oz, $1008.52/oz, $1007.21/oz, $1005.72/oz

Psychological: $1000/oz, 2009 highs and March 2008 highs