Gold is continuing its cool-down following the explosive breakout earlier this week. The precious metal has stabilized along our 2nd tier uptrend line and is presently trading just below the psychological $1050/oz level. We notice a similar dip in the AUD/USD and it seems the two are solid correlations right now. The reason for the consolidation in gold, besides oversold conditions, is the inability of the EUR/USD and GBP/USD to overcome our near-term technical barriers. While movements in the AUD/USD should continue to impact the precious metal, the continuation of gold's rush will likely depend upon an accompanying breakout in the EUR/USD. Gold has been closely correlated with the EUR/USD throughout the year. Therefore, a topside breakout in the EUR/USD would drive gold to its next leg higher. As we mentioned, the EUR/USD does face a few immediate-term technical obstacles (refer to EUR/USD commentary). Therefore, the EUR/USD's upward trajectory isn't secure quite yet. Therefore, investors should eye the EUR/USD's potential interaction with our topside technicals for the time being to gauge whether gold can leap past previous highs.
Meanwhile, econ data Q3 earnings will heat up around the globe next week following Monday's U.S. banking holiday. Therefore, volatility in the FX markets should pick up, implying continued volatility in gold over the near-term. Gold's breakout this week likely implies more accelerated gains over the near to medium-term since the highly psychological $1000/oz barrier is out of the picture. The near-term is about gold setting a new, lasting top from which to consolidate from. For the time being we are unable to create any reliable downtrend lines. We maintain our positive outlook on gold trend-wise due to the aforementioned analysis.
Present Price: $1046.95/oz
Resistances: $1049.24/oz, $1052.89/oz, $1058.54/oz, $1061.40/oz
Supports: $1045.63/oz, $102.63/oz, $1037.99/oz, $1035.54/oz.