Gold is creeping higher in what can be considered an upward consolidation as the precious metal benefits from both its status as a safe haven and its negative correlation with the dollar. Gold’s negative correlation with the greenback finally kicked into gear yesterday as the precious metal popped towards $1240/oz with the EUR/USD and Cable continuing their recovery from their respective monthly lows. However, gold must still deal with $1250/oz, which has proven to be a thorn in its side on the previous two attempts. Rumors are spreading that the IMF and U.S. Treasury are piecing together a $350 billion line of liquidity for Spain. Although rumors are just rumors right now, should troubles in Spain accelerate this could be the driving force sending gold beyond $1250/oz since the precious metal becomes an ideal investment vehicle during moments of heightened uncertainty. Therefore, investors should keep an eye on the EU news wires over the next few trading sessions. Meanwhile, U.S. earnings are trickling in with key data points in deck tomorrow. Hence, markets could stay volatile over the next 24-48 hours, normally a suitable environment for gold.
Technically speaking, gold faces technical barriers in the form of intraday and 6/8 highs. Additionally, the psychological $1250/oz level should continue to serve as a solid technical barrier should it be reached. As for the downside, gold has multiple uptrend lines serving as technical cushions along with 6/10 and 6/4 lows. Furthermore, the psychological $1200/oz should serve as a solid technical support should it be tested. Meanwhile, gold is running low on topside technical barriers, normally a positive sign for the near-term.
Present Price: $1231.15/ oz
Resistances: $1232.22/oz, $1233.98/oz, $1235.75/oz, $1238.16/oz, $1241.94/oz, $1245.87/oz
Supports: $1229.56/oz, $1227.63/oz, $1225.20/oz, $1222.09/oz, $1219.16/oz, $1215.42/oz
Psychological: $1200/oz, $1250/oz
(click chart to enlarge)
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