Gold Consolidates Around $1140/oz with Broad-Based Dollar Strength

Gold is finally experiencing a period of consolidation following its incessant rise to $1150/oz. Gold is consolidating around the $1140/oz level, right along our 3rd tier uptrend lien while setting lower highs in the process. Gold’s weakness comes in reaction to pullbacks in the EUR/USD, AUD/USD, and GBP/USD. Additionally, the S&P futures have ducked back below their highly psychological 1100 level. All of these correlative forces are trimming gains and gold and allowing bulls to take a breather as investors closely monitor recent uncertainty in the FX markets. That being said, despite heavy losses in the Cable, the EUR/USD and AUD/USD have experienced what could be considered healthy pullbacks at this point. However, should losses in these currency pairs accelerate investors could opt to take further profits in gold since the precious metal tends to exert a negative correlation with the Dollar. After all, some sizable profit taking in gold wouldn’t be abnormal because it has been on a tear since breaking through $1100/oz.
Meanwhile, investors are eagerly awaiting next week’s economic data, most notably housing data and U.S. Prelim GDP on Tuesday. Should global econ data continue to disappoint, investors may choose to divest from riskier assets including gold since it tends to be negatively correlated with the Dollar and positively correlated with the S&P futures.
Technically speaking, we’re still hesitant to place a downtrend line on gold until we witness further consolidation/profit-taking. That being said, gold’s psychological $1150/oz continues to serve as the only viable topside technical due to the lack of historical perspective. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 11/16 lows and the psychological $1100/oz level should conditions deteriorate over the near-term.

Present Price: $1139.20/oz

Resistances: $1143.05/oz, $1145.61/oz, $1150.09oz, $1152.65/oz

Supports: $1137.60/oz, $1134.71/oz, $1130.54/oz, $1127.24/oz, $1123.51/oz, $1118.39/oz

Psychological: $1150/oz, $1100/oz