Thursday, December 17, 2009

Gold Drops with Broad-Based Dollar Strength

Gold is dropping beneath our 4th tier uptrend line right now, which is not shocking considering the broad-based Dollar rally taking place. Investors are snapping up the Dollar in reaction to a more hawkish monetary policy statement from the Fed. The central bank implied that it may be comfortable with allowing some of its alternative liquidity measures expire next year should economic fundamentals continue to improve. Both the EUR/USD and GBP/USD have been knocked beneath key uptrend lines while the AUD/USD drifts below its psychological .90 level. Hence, gold is exercising its negative correlation with the Greenback, sinking back toward previous September lows and the highly psychological $1100/oz level. That being said, gold’s intraday losses thus far aren’t as extreme as the downward movements in the EUR/USD. Hence, investors should continue to eye major Dollar pairs to determine whether we’re witnessing a temporary top in the Greenback considering the extent of today’s rise. If so, gold may opt to stab above its $1100/oz level. On the other hand, gold’s less severe reaction to the Fed’s decision may only mean that more extensive losses may be in the works over the near-term.

Technically speaking, gold still has multiple uptrend lines serving as technical cushions along with 12/11, 12/9, 11/13, and 11/10 lows. Furthermore, the psychological $1100/oz level could serve as a reliable technical support should it be tested. As for the topside, gold faces topside technical barriers in the form of 12/11,12/9, and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.

Present Price: $1112.60oz

Resistances: $1115.27/oz, $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz

Supports: $1110.77/oz, $1105.05/oz, $1100.15/oz, $1096.47/oz, $1088.30/oz, $1082.58/oz

Psychological: $1100/oz, $1150/oz, $1175/oz

No comments:

Post a Comment