Wednesday, February 3, 2010

Gold Fluctuates Wildly as Investors Digest Data

Gold has been all over the place today. The previous metal climbed higher during the Asia trading session as the risk rally continued in light of Australia’s encouraging Trade Balance data coupled with news the EU is accepting Greece’s plan to reduce its fiscal debt. However, gold reversed course and dove back to intraday lows after U.S. ADP Non-Farm Employment Change data printed stronger than analyst estimates. The positive headline ADP number sent investors back towards the Dollar in a hurry, registering large down bars in the EUR/USD and AUD/USD in the process. The Dollar’s rally resulted in an accompanying decline in gold due to correlative forces. Meanwhile, investors are awaiting U.S. Services PMI data due shortly. That being said, FX markets and gold could remain active throughout the remainder of the session. Speaking of volatility, the ECB and BoE will make monetary policy decisions during tomorrow’s trading session along with weekly U.S. Unemployment Claims. Hence, gold and the Dollar could remain active for the next 24-48 hours. Investors should monitor behavior in the major Dollar pairs closely for any new direction signals for this could be a telling sign for gold.

Technically speaking, gold’s earlier rally sent the precious metal beyond our 2nd tier downtrend line, a very positive development considering it runs through 2010 highs, or the $1160/oz area. However, gold has dipped back below our 2nd tier and remains under the influence of behavior in the Dollar. Hence, there are still downward forces at play. Gold now faces our 2nd and 3rd tier downtrend lines to the topside along with intraday highs. As for the downside, gold has multiple uptrend lines serving as technical cushions along with intraday and 2/2 lows.

Present Price: $1116.83/oz

Resistances: $1118.08/oz, $1121.04/ oz, $1124.86/oz, $1128.66/oz, $1132.02/oz, $1135.04/oz

Supports: $1113.71/oz, $1110.73/oz, $1107.33/oz, $1103.94/oz, $1100.55/oz

Psychological: $1100/oz, January highs and lows

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