Shall gold breach its historical high!!

Gold prices hovered today above $1015 an ounce reaching its second highest historical level after touching a high of $1035 last year. The shiny metal was boosted by the drop in the U.S. dollar versus a basket of major currencies which enhanced demand on the metal as an alternative investment.

The green currency fell to its lowest level this year against a basket of major currencies as indicated by the dollar index which is now at 76.35 compared with the opening at 76.53. The dollar is continuing its downside trend that started last week. Now, the federal currency is oversold as seen by the Stochastic Oscillator, where investors were waiting for a rebound. However, with the buoyant outlook and hopes for recovery drove the dollar to the downside.

Yesterday, retail sales report in the U.S. came better than forecasts and Bernanke mentioned that the recession is over. The upbeat data and announcements boosted demand for higher-yielding and riskier assets, causing the dollar to drop further. Consequently, commodities priced in the U.S. dollar spiked with oil rising above $70 a barrel.

As economies move towards recovery and oil prices increase, inflation concerns arise, lifting gold prices up as an inflation hedge. Today, the euro zone and U.S. will release their CPI data for August. The stimulus packages introduced by large economies is providing liquidity in markets and raising the general price level. Thus, analysts expect the coming period might witness a breach to the historical level touched last year.

Meanwhile, gold is traded at $1116.05 recording a high of $1017.99 and a low of $1006.10. The metal breached the resistance levels at $1012 and $1015 and will face the coming resistance at $1025 then $1035. The question is shall gold breach its historical high or is it going to face profit taking from investors or a rebound from the dollar.

On Tuesday, gold added $7.60 or 0.76% to close at $1007.45 an ounce. Gold prices were setin London on Tuesday at $996.00 an ounce, declining from $997.50 an ounce during the AM fixing. SPDR gold trust, the world's largest exchange-traded fund backed by bullion, stood at 1,077.63 metric tons on September 15.

Among other precious metals, platinum edged up to $1337.00 from $1331.00at Tuesday's closing; palladium soared to $295.00 from $294.00; and silver rose to $17.21 from $17.03.