Gold gave us a head-fake on Friday along with the EUR/USD as the precious metal buckled despite substantial buy-side action on the 1-hour. Gold has proceeded to re-gravitate towards its highly psychological $950/oz level. Today investors are caught in the middle of declining equities and a depreciating Dollar. However, since the precious metal tends to follow the Dollar more closely than equities, the bulls are winning out as gold sets a new bottom above Thursday lows. The battle between the bulls and the bears continues with $950/oz serving as the median. Ideally, bulls are looking for the combination of rising equities and a depreciating Dollar. Unfortunately, the Dollar and equities have been out of sync as proponents of the global economic recovery counterbalance the naysayers expecting a sizable pullback in the S&P futures. Regardless, investors should pay closer attention to the Dollar since gold should ultimately follow its negative correlation with the Greenback.

Technically speaking, gold faces multiple uptrend and downtrend lines in either direction. However, overall momentum continues to pull in favor of the bulls considering all of gold's consecutive lows combined with the fact that the S&P futures are still trading comfortably above 1000. On the other hand, should S&P futures deteriorate, it will be interesting to see whether gold decides to follow suit if the Dollar continues to depreciate. The big concern would be if a decline in U.S. equities is accompanied by a pullback in the EUR/USD and GBP/USD, causing gold to tumble in the process. Any decline below our 1st tier uptrend line could result in a sizable leg down. Therefore, investors should keep a close eye on the correlation between the Dollar and the S&P futures. As for the topside, gold face our 2nd and 3rd tier downtrend lines along with 8/28 highs. An eclipse of these 3 barriers would likely result in a retest of previous August highs.

Present Price: $950.00/oz

Resistances: $949.73/oz, $950.75/oz, $953.42/oz, $955.58/oz, $957.36/oz

Supports: $947.69/oz, $946.63/oz, $945.15/oz, $943.88/oz, $942.74/oz

Psychological: $950/oz