Gold is holding steady around the highly psychological $1000/oz level; experiencing some weakness on declining volume as investors nibble on an oversold Dollar. However, the precious metal has avoided a retest of September 10th lows thus far, indicating the pullback has been driven by profit-taking following gold's impressive run to new 2009 highs. We recognize tight resistances and supports, indicating gold should remain within a relatively narrow trading band due to the lack of global economic data. Investors are taking the opportunity to lock-in profits across the board as they await Wednesday's flood of economic data and central back meetings. We notice similar weakness in the EUR/USD, crude, and the S&P futures. However, all three are holding onto their technical supports, telling us continual consolidation may be in order for gold. After all, the $1000/oz level is highly psychological, and the precious metal will need a large jolt to break free. We have little reason to alter out positive outlook on gold trend-wise. Meanwhile, investors should keep a close eye on the behavior of gold's correlations for any indication of a substantial technical reversal.
One headline investors should take note of is the IMF's desire to auction off just over 400 tonnes of its gold reserves. China has taken interest in the offering with the nation seeking to diversify its massive reserve of Dollar-denominated assets. Though the huge sale of IMF gold has not been finalized, such a transaction would represent a large boost in overall supply and reduction in demand, thereby weighing down on price. China recognizes the price impact of such a move, and is requesting a substantial discount should it purchase the IMF's gold. Investors should monitor the situation closely since it could provide a sudden price shock to gold if the transaction goes through.
Technically speaking, gold's psychological $1000/oz area should continue to serve as a strong support. Our 2nd tier uptrend line represents an important technical cushion since it runs through September 10th lows. A failure of our 2nd tier could result in a sharp reversal. As for the topside, 9/11 and 9/17 highs serve as technical barriers along with our 3rd tier downtrend line.
Present Price: $999.75/oz
Resistances: $1002.91/oz, $1004.78/oz, $1007.21/oz, $1009.08/oz, $1010.39/oz
Supports: $998.61/oz, $995.06/oz, $993.19/oz, $992.07/oz, $989.08/oz, $987.02/oz
Psychological: $1000/oz, 2009 highs and March 2008 highs