Gold Continues Monday’s Pullback On Declining Volume

Gold continued Monday’s pullback on declining volume has investors locked in profits from the precious metal’s nice run.  Since volume fell with price, we don’t view yesterday’s sell-off as significant and gold is presently finding support on our 1^st tier downtrend line.  The precious metal has outperformed as of late, putting on an impressive show and clearing the way for a breakout in the S&P futures due to their positive correlation.  In fact, the S&P set new 2009 highs yesterday.  It appears as if it is the S&P’s turn to lead way as investors look to make a statement by following through on Monday’s key fundamental step.  Gold has a few challenging obstacles to overcome in the near-term, the most important being our 3^rd tier downtrend line and the highly psychological $1000/oz level.

Gold will need a strong confirmation from the S&P and continued depreciation of the Dollar to have a chance of leaving $1000/oz behind.  Until our 3^rd tier downtrend line is breached, the possibility remains that gold could duck back into its medium-term downtrend line.  However, this attempt to beat $1000/oz seems more promising than gold’s last try in February.  Both the GBP/USD and EUR/USD made fundamental bull statements a while back and the global economic recovery is gaining steam.  Furthermore, crude has been on a tear as investors worry about future inflation.  Gold has traditionally served as a reliable inflationary hedge.  Therefore, we maintain our bullish outlook trend-wise unless the precious metal should make a fundamentally significant move to the downside.

Fundamentally we find resistances of $978.11/oz, $980.56/oz, $983.25/oz, $985.33/oz and $987.29/oz.  To the downside, we see supports of $975.81/oz, $972.34/oz, $970.35/oz, $967.81/oz, and $964.89/oz. Gold is currently trading at $977.30/oz.

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