Gold Drives Past $1100/oz

Gold has popped back above its highly psychological $1100/oz level despite a large step back in the AUD/USD during the Asia trading session. Outside of volatility in the Aussie, we recognize stability in both the Cable and EUR/USD as negative psychological forces subside. Consolidation and stabilization in these two currency pairs has allowed gold to gain back some lost ground from what now appear to be oversold conditions. Meanwhile, the S&P futures are logging solid gains this morning after U.S. Pending Home Sales printed above analyst expectations, continuing the theme of strong U.S. economic data. Encouraging U.S. data is proving to be a positive catalyst for gold since the precious metal is positively correlated with U.S. equities. That being said, the U.S. will release Services PMI and ADP Employment Change data tomorrow. Hence, volatility in the FX and currency markets could pick up over the next 24-48 hours. In the mean time investors should keep an eye on activity in the Dollar and take note of any further directional breakouts.

Technically speaking, gold has hopped above our 3rd tier downtrend line, a positive technical development considering our 3rd tier runs through 1/20 highs, or the $1040/oz area. Hence, gold could be in for further topside movement over the near-term should the previous metal hold above our 3rd tier downtrend line. As for the downside, we’ve readjusted our uptrend lines to compensate for today’s gains. Therefore, gold has multiple uptrend lines serving as technical cushions along with the psychological $1100/oz level.

Present Price: $1111.50/oz

Resistances: $1113.71/oz, $1117.38, oz, $1121.03/oz, $1125.92/oz, $1128.66/oz, $1132.01/oz

Supports: $1109.44/oz, $1106.40/oz, $1102.13/oz, $1099.07/oz, $1094.19/oz

Psychological: $1100/oz, January highs and lows