Gold Pulls Back With Appreciating Dollar

Gold has backed away from our 1^st tier downtrend line, and is dropping below our previous 1^st tier uptrend line despite a slightly better than expected HPI number.  Even though the decline in home prices improved slightly, the abnormal negative growth rate ensues.  The mixed economic data from both the EU and Britain earlier today is having a positive impact on the Dollar as some investors divest from risk.  The appreciation of the Greenback creates a drag on gold due to the negative correlation between the two.  In coordination with the Dollar’s strength, U.S. equity and crude futures are weakening in the open market.  Therefore, the correlations are in place today, and gold’s immediate-term fate rests on the outcome of upcoming consumer confidence and Chicago PMI data.

Investors shouldn’t forget we’ve seen more sell-side than buy-side in interest gold this month even though the precious metal has a medium-term uptrend in place.  Hence, investors shouldn’t rule out another near-term leg down with a retest of June lows.  Once again, the performance of gold relies upon the outcome of this week’s flood of economic data.  If the rest of the economic data this week outperforms, gold could climb back above the psychological $950/oz level.  Regardless, we anticipate an increase in volatility over the next few trading sessions.

Present Price: $935.25/oz

Resistances: $936.01/oz, $939.02/oz, $941.85/oz, $943.88/oz, $945.75/oz

Supports: $932.48/oz, $929.77/oz, $927.98/oz, $$925.24/oz, $923.59/oz

Psychological: $900/oz, $950/oz

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