Morning Futures Roundup

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Gold Maintains its Luster
 Fundamentals

Gold futures continue to push higher on a weaker Dollar and demand as an alternative investment. The recent surge in the Dow over the 10,000 mark has hurt the greenback, as investors are choosing riskier assets instead of the Dollar and treasuries.

The surge in equity prices also gives Gold a boost as an alternative investment. Stock market valuations are extremely high compared to actual growth projections, suggesting the market may be ripe for a sharp move once it does correct. It is impossible to pick tops in equity prices, so weary traders seem to be positioning themselves in Gold rather than bonds. Central bank policy in the West continues to favor stimulating growth rather than taming inflation, making precious metals all the more appealing.

Meanwhile, China and Russia seem to be stockpiling Gold, bolstering the physical market. While physical buying by investors and governments had been very stout, jewelry demand around the globe remains weak -- most notably in India, where high prices may result in disappointing wedding season results.

Likewise, industrial and dental demand has been well short of what the Gold market is accustomed to seeing. If anything, the lack of Gold demand outside of investment may be the Achilles heel for prices. The upcoming Christmas shopping season may offer traders further clues as to how strong physical demand will be going forward.

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Technical Notes

The December Gold chart shows prices consolidating after the recent breakout. Given the overbought conditions on the RSI indicator, it would not be surprising to see prices come down to test newly established support near the 1025.00 level. If the market does not break below the 1050 mark, prices may test the 1125.00 level. Momentum seems to be flattening out, suggesting prices may consolidate further before finding a short-term direction.

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