While our immediate bias is to the downside, the commodity's ability to reverse part of its Thursday losses and climb back above the 1,329.25 level, its Dec 16'2010 low is suggesting a recovery higher could be developing. This however is with one warning, that a firm hold above the 1,329.25 level must occur thus preventing Gold from returning to the 1,307.60 level, traded on Friday. Above the former (1,329.25) will open the door for more strength towards the 1,152.95 level, its Jan 24'2011 high with a violation of there pushing the commodity further higher towards the 1,378. 80 level followed by the 1,392.25 level, its Jan 13'2011 high. We expect a cap at the latter to turn the commodity back lower but if that fails, a run at the 1.431.28 level and the 1,450.00 level should follow. Alternatively, below the 1,307.60 level will turn our focus to the 1,300.00 level, its big psycho level where we expect it to provide a strong support and turn the commodity back up on an initial test, but if it snaps, expect Gold to decline further towards its long-term rising trendline at 1,288.75.
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