Gold Tops and Declines

Gold has topped out and is trading back around $1130/oz following the precious metal’s solid topside breakout. Gold is heading lower following a negative reaction to U.S. data revealing a large decline in Pending Home Sales. Today’s discouraging U.S. housing figure sent investors towards the Dollar for safety, knocking the risk trade and dragging gold lower with it. The precious metal was outperforming lately despite the Dollar’s strength. However, gold is playing along today and some profit taking isn’t surprising since the precious metal was getting awfully close to its psychological $1150/oz level and previous 2010 highs. Meanwhile, the markets could end the trading session on a volatile note with an important EU meeting tomorrow followed by key U.S. employment data. The U.S. will release its Non-Farm Employment Change and headline Unemployment Rate figures. Although the ADP printed about in line with expectations on Wednesday, the advance number has been known to be somewhat unreliable in the past. Therefore, investors should keep an eye on the Dollar’s reaction to tomorrow’s news and data events.

Technically speaking, we’ve formed two new makeshift downtrend lines running through 3/3 levels to give investors an idea of present resistance. Gold is still well above downtrend lines running through 2/19 and 1/11 highs, meaning there aren’t any foreseeable noteworthy downtrend lines in play right now. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 3/2 lows. Additionally, the highly psychological $1100/oz level could serve as a reliable technical cushions should it be tested.

Present Price: $1128.95/oz

Resistances: $1131.07/oz, $1134.88/oz, $1138.68/oz, $1140.96/ oz, $1143.46/oz, $1146.29/oz

Supports: $1126.71/oz, $1123.03/oz, $1120.42/oz, $1117.76/oz, $1114.72/oz, $1110.53/oz

Psychological: $1100/oz, $1125/oz, $1150/oz, January Highs, March Lows