Wednesday, November 18, 2009

Gold Hits Psychological $1150/oz Level

Gold is continuing its incessant rise higher despite very limited participation from the Dollar. The EUR/USD and AUD/USD are both fluctuating between their respective uptrend and downtrend lines while the S&P futures hover around their highly psychological 1100 level. Gold has ignored its usual positive correlations since breaking through its psychological $1100/oz level and seems to have a mind of its own. Gold’s aggressive bull movements without a sizable depreciation of the Dollar is a bit puzzling. Therefore, investors should question if/and when gold’s correlations will lock back into place.

Meanwhile, U.S. equities have held up well considering the continual wave of negatively mixed econ data. Despite today’s slightly positive CPI numbers, both Building Permits and Housing Starts registered disconcerting declines. Therefore, America’s recent fundamentals are indicating a cool down in the nation’s economic recovery. Hence, the S&P’s resilience above its highly psychological 1100 level has been impressive. However, it feels like something’s got to give and investors will eventually need to favor one direction or another in U.S. equities and the Dollar. Investors should closely monitor the EUR/USD, GBP/USD, and AUD/USD for a directional statement since gold has been more closely correlated to the Dollar than equities so far this year.

Technically speaking, we’re still unable to install a downtrend line on our chart due to a lack of historical perspective. Therefore, it’s difficult to find any topside technical barriers besides gold’s potentially psychological $1150/oz level. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 11/17 and 11/16 lows along with the psychological $1100/oz level.

Present Price: $1147.70/oz

Resistances: $1150.09oz, $1152.65/oz

Supports: $1143.05/oz, $1137.60/oz, $1134.71/oz, $1130.54/oz, $1127.24/oz, $1124.27/oz

Psychological: $1150/oz, $1100/oz

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