Gold Starts To Top Out After Incredible Run

Gold is beginning to cool down following the amazing gold rush that took place in reaction to the RBA being the first central bank to raise rates following the beginning of the credit crisis.  The AUD/USD took flight after the RBA’s decision in conjunction with much better than expected Aussie employment data.  Breakouts in gold and the AUD/USD spurred a broad-based depreciation of the Dollar, only fueling gold’s bolt towards new record nominal highs.  However, the psychological impact of the RBA’s monetary shock could start to wane since both the ECB and BoE kept their monetary policies unchanged today.

The EUR/USD and GBP/USD still have to deal with a few technical barriers before participating more fully in the broad weakness of the Dollar.  Attention will now turn to Q3 earnings season and the reaction of U.S. equities.  Better than expected Q3 results would likely depreciate the Dollar further and help gold extend its breakout.

Meanwhile, it seems gold will cool and consolidate as investors digest this week’s explosive movements.  Technically speaking, we can’t place a downtrend line yet since we’re dealing with uncharted topside territory.  However, we’ve laid a few downtrend lines to give an idea of support.  It seems the $1050/oz level will play a psychological role for the time being.  Regardless of current weakness, gold’s breakout to record highs sends a message of commitment to a longer-term uptrend in the precious metal.

For the time being investors should keep an eye on the EUR/USD and GBP/USD and their interaction with their respective topside technical barriers should they be reached.

Present Price: $1052.45/oz

Resistances: $1053/oz, $1056.34/oz, $1058.54/oz.

Supports: $1049.24/oz, $1046.55/oz, $1042.63/oz, $1037.99/oz, $1035.54/oz.

Psychological: $1050/oz

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