Gold is consolidating today as anticipated. The precious metal is trading off weekly highs, yet is holding above our 1st tier uptrend line, February 2008 highs, and the highly psychological $1000/oz level. Gold is merely taking a breather after investors snatched up the precious metal in light of the continual selloff in the Dollar. Gold continues to exercise a positive correlation with U. S. equities, so a breach of 1050 in the S&P futures was more than enough of an incentive for investors to rush gold.

We find little reason to favor the Dollar nor frown upon U. S. equities over the near-term, thereby giving gold the opportunity to tackle 2008 highs. However, March 2008 highs could still prove to be a challenging immediate-term obstacle should they be encountered. Furthermore, we recognize considerable immediate-term resistance in the EUR/USD at 1.50 and support in the USD/JPY at 90. Investors should disregard the selloff in the GBP/USD for right now since it’s based off of the BoE’s monetary policy approach rather than broad-based fundamentals.

Considering the extent of the rally in gold and equities as well as the heavy sell-off in the Dollar, consolidative profit- taking around present levels is not surprising. Furthermore, news will be relatively quiet on the econ data front until the EU releases its wave of PMI data next Wednesday. Hence, investors may take the next couple sessions as an opportune time to continue to lock-in some profits while gold consolidates. Regardless, the medium-term uptrend in gold is alive and well, and we expect March 2008 highs to fail over the near-term.

Present Price: $1009.25/oz

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