Gold futures continue scaling the wall of worry, with weakness seen at the start of 2011 giving way to a flurry of buying activity in the shadow of major tensions in the Middle East. Combined with sluggish economic measurements in the US and Europe, and renewed commitments from Fed Chairman Bernanke and ECB President Triche to keep interest rates low and monetary stimulus high for the time being, the outlook for Gold is again tipping in favor of the bulls..

The price action for the last half of January and the first week of February has been a stair-step grind back towards the record highs posted at the end of last year above $1,400 per ounce. This erratic path upwards fits nicely into a classic Head & Shoulders chart pattern, as illustrated here on the 240-minute time interval. The market is finding some short term resistance at the $1,350 level as it attempts to break out above the neckline of the Head & Shoulders, giving up some of the initial gains above that price, but holding enough ground to maintain the projected forecast for a run towards a higher trading range.

The Head & Shoulders formation has established a longer term support level far below the market near $1,325 per ounce, with the previous resistance band at $1,350 now acting as minor support as well. If the price action to begin the trading week proves bullish, this will likely bring the momentum buyers back into the market, driven by the positive technical developments as well as the uncertainties built into the headlines as Egypt enters its 3rd week of open revolt.

A subdued start to the trading week may see Gold dipping back into the lateral channel established by the Head & Shoulders chart pattern, possibly allowing for sideways trading to define the market until another run towards the target can find its footing.

The breakout from the formation projects a target price forecast for Gold to reach $1,361 per ounce at a minimum, with a the high end of the range coming I in at $1,370. If these levels are achieved, there is very little technical resistance below the $1,400 level, and the market may find the path of least resistance to be upwards to retest record highs once again.

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