Gold Continues To Climb With Positive Correlation To US Equities

Gold continues to climb north while locking in a positive correlation with U.S. equities. The precious metal is enjoying gains and only partially participating in pullbacks. Volume is falling off, implying the present rally could experience a peak and consequential pullback in the near-term. However, the uptrend seems to be in the driver’s seat and this could continue to be the case until our downtrend line and/or the psychological $950/oz barrier. Meanwhile, gold is building up a solid base above the critical $900/oz psychological level. As a result, any near-term weakness has several lines of defense ready to act. Therefore, we have a bullish outlook for the near-term.

Meanwhile, the precious metal continues to exhibit odd behavior, including a positive correlation with equities. Perhaps gold is thriving off of rising oil and signs of inflation. We’re seeing a positive reaction to a higher than expected Core CPI from the U.S. coupled with a higher than expected headline CPI from the EU. Additionally, we may be witnessing further diversification of China’s reserves from the Dollar into gold, reducing supply and raising price. Fundamentally, we maintain resistances of $933.40/oz, $940.04/oz, $943.18/oz, $947.81/oz, and $951.34/oz. To the downside we hold supports of $923.07/oz, $918.43/oz, $911.55/oz, $908.39/oz, and $902.12/oz. Gold is currently trading at $929.85/oz.

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