Outlook For Gold Will Likely Rely On The Resilience Of U.S. Stocks

Gold is contracting sharply after Friday’s consolidation.  The precious metal is exhibiting a negative correlation with the Dollar.  The positive correlation with U.S. equities is a bit odd and raises a red flag.  These types of correlations remind us of late 2008 when commodities and equities joined together in large declines across the board, signaling deflation.  Therefore, such movements show investor confidence is withering and bulls should be wary.  Gold’s fundamental defenses are wearing thin, and all the precious metal has left is our 1^st tier uptrend line and the highly psychological $900/oz level.  These two cushions should put up quite a fight, and a movement below will not come easily.

However, if these fundamentals fail to hold, then we could witness a massive movement to the downside with a clear commitment to a downtrend.

The outlook for Gold will likely rely on the resilience of U.S. equities and their ability to pull themselves together after the crippling psychological blows from this weekend.  Fasten your seatbelts, because we’ll be in for a wild ride this week.

Fundamentally we see resistances of $915.16/oz, $916.98/oz, $919.32/oz, and $922.45/oz.  To the downside, find supports of $911.78/oz, $908.66/oz, $906.32/oz, $903.71/oz and $901.37/oz.  Gold is currently trading at $913.70/oz.

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