Gold continued its ascent yesterday and popped past our 2nd tier downtrend line this morning. The gold rush carried a lot of momentum with it and $1000/oz is suddenly within reach. It remains to be seen whether the recent surge in gold indicates a flight for safety, or a diversification of China’s massive reserves into the precious metal. Gold is moving higher without a large depreciation of the Dollar. In fact, we believe gold’s strength may have dragged the Greenback lower yesterday as investors acted according to correlations. The precious metal is obviously sending a message. Unfortunately, the message is not quite clear.

Regardless of the message, gold has made a very bullish move over the past 24-48 hours. The next test will be our 3rd tier downtrend line. If the precious metal can climb above our 3rd tier, then a retest of $1000/oz and February highs is probable. However, we notice buy-side volume is declining, and its possible bulls may not have enough backing to punch through the precious metal’s technical barriers. $1000/oz and previous 2009 highs should prove to be difficult obstacles to overcome. Therefore, space to the topside is becoming limited. Meanwhile, we notice multiple inflection points in the EUR/USD and GBP/USD, indicating FX volatility could increase over the next couple sessions.

Present Price: $984.05/oz

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