There has been a band of overhead chart resistance centered between $1630 – $1620 that has been keeping gold in check for the last few weeks. Gold has been probing this level for the last couple of days and has been unable to convincingly push past it. Today that all changed as gold charged higher in the very early hours of European trading. While it has been stymied in New York from furthering its overnight gains (no surprise there), it has also been attracting additional buying above $1630. As long as this buying continues, gold will have sufficient momentum to launch an attack on the $1650 level.
A large number of traders are watching the 200 day moving average to see how the metal handles itself here. The longer it holds ABOVE this level, the more nervous the shorts are going to become. From a technical perspective, a market in a bearish mode should not be able to push through this level but should fail near or at that level and then begin retreating in price. This average comes in near the $1629 level which reinforces the horizontal resistance levels noted on the chart. You will note that gold is trading above both these levels as of this hour.
If this market can continue higher tomorrow and take out $1650, we will see $1680 in very short order as shorts begin exiting more earnestly while buyers sitting on the sideline observing its performance will grow emboldened. That will bring the open interest up as hedge fund money returns more strongly.
Downside probes should meet up with valued-based buying above and just slightly below the $1600 level. Only a failure there will see the metal retreat deeper back towards $1575.
The Dollar is setting back a bit from its recent 52 week high but remains above both its 10 day and 20 day moving averages. The weekly chart is positive but does show a level of chart resistance just shy of the 82 level which is exactly where it is currently stalling a bit. Dollar bulls need to clear this level before the week is out if they hope to take the Dollar up towards 83.50 – 84.00.
The HUI is rising alongside of both gold and silver today as there is a general bid into equities across the board. The equity guys are anticipating better economic numbers coming out of the US and seem to be dismissing any concerns related to European sovereign debt issues for the time being. That will help keep the miners moving higher but I am noting the fact that they not been able to extend their gains from the opening hour of trading today. Sellers are emerging but the buyers have still been continuing so both sides are currently stalemated heading into the last hour of trading. We will see which side blinks first.
Note that the index still remains below the 50 day moving average although it is well above the bottom of the 15 month long trading range down near 500 – 490.