Morning Futures Roundup
Fundamentals Bullish, But Gold Questions Remain
Gold futures have moved solidly above the $1,000 mark once again on Dollar weakness, but investors are beginning to question whether prices will be willing to advance beyond highs made in September. The economic outlook is beginning to look a bit hazier once again, making Gold attractive as an alternative investment. Investment in the SPDR Gold Trust keeps pouring in from speculators who are concerned that stock valuations have risen too sharply, too quickly. Inflation pressure may be heating up once again due to stimulus spending and a weakening Dollar, further adding to Gold’s cause.
The stock market has not had a meaningful correction to this point, and it is difficult to tell if and when it will correct. If the stock market faces pressure, the Dollar may find some support and, in turn, Gold prices could correct. The US Dollar is going to have a major impact on whether Gold can sustain rallies beyond the $1,000 level. If forex traders are unable to push the Dollar lower, it could force Gold rallies to stall out. Another bearish force that may inhibit further advances could be the lack of value at current price levels
The December Gold chart shows a confirmation of an M-top with the recent decline below the $1,000 level. The chart was flagging, indicating prices could move lower. However, the recent spike in prices makes the pattern invalid. Prices have now solidly closed above the 20-day moving average, indicating that a near-term low may be in place. In order for Gold prices to maintain their upward momentum, the December contract must close above the September 16th high close of 1020.20. Failure to do so could spur profit-taking and possibly trigger bearish action on the chart.
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