Gold Stabilizes with Dollar

Gold has continued to avoid a retest of the psychological $1100/oz level, finding support above 12/11 lows and our 4th tier uptrend line. The precious metal is experiencing a bit of intraday strength after U.S. economic data printed mixed. Although PPI came in 10 basis points above analyst expectations, U.S. manufacturing and production data sent a mixed signal. Hence, investors are taking today as an opportunity to lock in gains on the Dollar. The EUR/USD, GBP/USD, and AUD/USD are all stabilizing from intraday lows, supporting today’s consolidation in gold. However, volatility could pick up tomorrow with more key data from the EU, UK, and U.S. along with the Fed’s monetary policy decision. Although the Fed is expected to keep its monetary policy unchanged, any slight shift in its monetary policy stance in response to recent unemployment and consumption data could yield Dollar strength and gold weakness. However, if the Fed downplays the recent upturn in economic data and affirms its past monetary policy, then we may witness a bounce in gold and weakness in the Dollar. Naturally, the abundance of fundamental economic data releases has the potential to move the market as well. Hence, investors should monitor activity in the FX markets as investors react to tomorrow’s events. That being said, the EUR/USD and Cable are flirting with some important uptrend lines. Any significant setbacks in these currency pairs could drag gold lower due to the precious metal’s negative correlation with the Dollar.

Technically speaking, gold 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, we’ve placed a downtrend line on our chart, albeit a steep one. Additionally, 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: $1121.60oz

Resistances: $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz, $1152.85/oz

Supports: $1115.27/oz, $1110.77/oz, $1105.05/oz, $1100.15/oz, $1097.29/oz, $1088.30/oz

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