Gold has surged higher in reaction to the surprise addition of funds to the BOE’s quantitative easing operation.  In addition to the BOE’s decision, the ECB has announced the implementation of alternative liquidity measures of its own.  The ramp up in liquidity around the globe is creating fear of future inflation, which in turn is boosting the price of gold. 

However, if the rampant inflation does incur, it may not be recognized in CPI data for quite some time.  Hence, we believe the run up in gold may be a speculative over-reaction.  Investor uncertainty concerning gold’s recent jump is represented in the lighter volume backing the up-bar in comparison to 5/5’s down-bar.  As a result, the precious metal is pulling back from our 2nd tier downtrend line.  Hence, we will hold our bearish outlook trend-wise for the time being.  

Regardless, gold has made some impressive strides to the upside in the near-term.  The precious metal logged some solid volume to the upside yesterday despite rising U.S. equities.  Furthermore, gold continues to fight back above the highly psychological $900/oz level, showing the precious metal has a path not entirely related to the direction of equities.  Gold’s the correlations have certainly been exhibiting odd behavior as of late.  Therefore, it may be unwise to rely upon its normal negative correlation with equities.  Investors may want to keep a closer eye on upcoming CPI data when analyzing gold.  If we do realize the anticipated surge in inflation, gold may be have the ammunition to charge ahead.        

Fundamentally we find supports of $913.15/oz, $910.98/oz, $908.37/oz, $905.98/oz, and $903.59/oz.  To the topside, we see resistances of $915.76/oz, $917.71/oz, $920.75/oz, $920.75/oz, and $925.31/oz. Gold is currently trading at $913.35/oz.

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.