By Russell Glaser – The price of spot gold continues to rise, moving closer to the psychological level of $1,300 as the dollar falls out of favor.
During the European trading session on Monday, spot gold prices held close to their all-time high, trading at $1,200, from an opening day price of $1,2981.
The price continues to be buoyed by overall dollar weakening that intensified following last week’s announcement by the Federal Reserve. The release of the Federal Reserve Open Market Committee meeting minutes declared the Fed’s willingness to enact further quantitative easing measures to help stimulate the US economy.
The chance of further quantitative easing was increased on Friday in a speech by Fed Chairman Ben Bernanke. The Fed chief noted the effort to reduce unemployment has been significant. Despite the lengths the Fed’s has gone to, the quantitative easing has not reduced rising US unemployment numbers. Last month the US unemployment rate rose to 9.6% from 9.5%.
The easing of monetary policies in the US has been a major contributor to the rise in the price of spot gold. As a steady stream of dollars continue to increase in the markets, inflation fears are rising given the lack of commitment by central bankers to reduce the amount of dollars available.
As the dollar continues to fall out of favor with traders, market players have looked to other instruments to act as safe havens such as the Swiss franc and the Japanese yen. However, none of these instruments are able to keep up with the strong appreciation that has been seen in the price of spot gold.
Gold prices are up over 400% since 2001. Looking at the weekly chart, since the price of spot gold rose from the $685 resistance level in October of 2008; the price is up 90%. A rising trend line follows the rise in the price.
The price of spot gold has made a push above its previous high at $1,265 (S1) and reached a new all-time high last week, trading at $1,299. The next support level falls at the July low at $1,156 (S2). $1,300 should act as the next resistance level because it is a big round number that traders tend to focus on and therefore set their limit orders near this level. Should the $1,300 price level be breached, traders will want to target the $1,400 level for spot gold prices.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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