Gold sold off sharply yesterday on a surge in sell-side volume on the 1-hour despite the relative lack of economic data, only to climb back above $950/oz in reaction to a positive U.S. HPI number. However, the precious metal is edging back below $950/oz as investors react negatively to better than expected consumer confidence data. The negative response to an improvement in consumer confidence is odd, and we notice the S&P futures are relinquishing their pre-market gains. Meanwhile, the Dollar is strengthening in the wake of the consumer confidence news, only adding downward pressure on gold due to their negative correlation.
Despite gold's wild fluctuations, the precious metal always tends to fluctuate back towards its psychological $950/oz level while setting higher lows and lower highs. Hence, we continue to view this wide correlation pattern leading towards an unknown end-point. Investors are likely waiting to see what happens to the Dollar's trend since both the GBP/USD and EUR/USD have been consolidating heavily as well. Gold's behavior reflects the overall investor decisiveness present in the marketplace as economists debate whether the economic recovery will be lasting or not.
Technically speaking, to the topside gold must deal with our 2nd tier and 3rd tier downtrend lines along with 8/21 highs. As for the downside, the precious metal has multiple technical cushions including our 3rd and 2nd tier uptrend lines along with intraday lows and the $940/oz level. Investors should pay attention to the EUR/USD's interaction with our 2nd-4th tier downtrend lines. If the EUR/USD can break free of our 4th tier, gold may breakout to the upside since it has recently held a stronger positive correlation with this currency pair.
Present Price: $948.45/oz
Resistances: $949.69/oz, $951.21/oz, $952.35/oz, $953.74/oz, $954.88/oz
Supports: $947.28/oz, $945.51/oz, $944.50/oz, $942.98/oz, $941.46/oz