Gold Gravitates Beneath $950/oz

FastBrokersFX 11 August 2009

Gold’s pullback picked up speed on Friday as the precious metal experienced heightened sell-side volume in the midst of a broad-based appreciation of the Dollar. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in the process. Furthermore, it appears the precious metal may give up on the bottom-end of its 7/20-7/28 trading range. We notice a similar occurrence in the EUR/USD, indicating a negative technical development considering their tight positive correlation.

Meanwhile, the Greenback continues its rapid comeback, only placing further downward pressure on the precious metal. Therefore, a test of our 3rd tier uptrend line and $940/oz appears likely. Crude and the S&P futures continue to stabilize above their respective psychological levels, $70/oz and 1000. The stability in gold and U. S. equities is helping mitigate losses in gold due to their positive correlations. However, we have witnessed gold follow its negative correlation with the Dollar time and again, meaning further appreciation of the Greenback should undoubtedly have a negative impact on the precious metal despite resilience in crude and equities.

Meanwhile, even if gold’s pullback should pick up momentum past our 1st tier uptrend line, we can form a couple more medium-term uptrend lines beneath this area. Therefore, gold’s medium-term uptrend is intact. However, gold is only building more obstacles to the upside as it declines below important levels, most notably $950/oz. Hence, bulls would like to see gold recover above our 2nd tier uptrend line and the psychological $950/oz level so the precious metal can save face and attempt to build a new base.

Present Price: $945/oz

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