Friday, October 16, 2009

Gold Consolidates around $1050/oz

Gold has bounced off our 2nd tier uptrend line and is presently consolidating around the psychological $1050/oz level as investors take profits in the EUR/USD, AUD/USD, and the S&P futures. Investors seem to be taking a breather ahead of public addresses from the RBA, Fed, and BoE along with BoJ minutes. Quotes from the central banks are bound to be FX movers since investors will be looking for their respective monetary stances. Meanwhile, gold continues to be more closely tied to the Euro and Aussie than the Pound and Yen. Yesterday reinforced this observation when gold contracted while the Pound and Yen surged. Therefore, investors should pay particularly close attention to activity in the EUR/USD and AUD/USD along with their major cross-pairs. Today’s Q3 earnings and U.S. econ data came in negatively mixed and are increasing investor uncertainty in regards to the rest of the earnings season. The negative development in earnings has put gold’s uptrend on pause.

Technically speaking, gold appears to be creating a top, yet it’s uncertain how lasting consolidation will be. We expect continued volatility in the FX markets next week, so investors should get a better idea of whether investors are willing to test $1075/oz or opt to lock in more profits. Gold’s longer-term bull trend is alive and well considering the historic breakout last week. Meanwhile, the $1050/oz zone should continue to serve as a psychological pull until the Euro or Aussie make a next noteworthy directional move. Gold has multiple uptrend lines serving as cushions along with 10/9 and 10/7 lows. However, a drop beneath our 1st tier uptrend line could result in a retracement towards September highs. Therefore, gold is stuck in an uncertain place right now. The precious metal’s impressive run supports the argument for further profit taking. However, gold would be inclined to participate to the topside should the Dollar experience another round of weakness against the Euro and Aussie. As for the topside, gold faces resistance in the form of 10/8 and 10/14 highs along with the psychological $1075/oz and $1100/oz levels.

Present Price: $1054/oz

Resistances: $1054.82/oz, $1058.54/oz, $1061.40/oz, $1065.15/oz, $1068.06/oz.

Supports: $1049.57/oz, $1046.40/oz, $1042.96/oz, $1039.01/oz, $1035.58/oz

Psychological: $1050/oz, $1075/oz, $1100/oz

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