Morning Futures Roundup
Spooky Month Ahead for Gold?
Fundamentals
Gold futures are little changed in overnight trading, but barring the unforeseen, are poised for a second straight monthly gain. It is no coincidence that the Dollar Index has fallen for the fourth straight month. Yesterday’s strong showing in US GDP data presents a unique predicament for the precious metals market.
On one hand, the data confirms that the US economy has, at least at the present moment, pulled itself out of the worst downturn in decades. This can be seen as a positive force for the Gold market, as this would suggests that inflationary pressure may accelerate and the decline in jewelry demand may level off or reverse course.
On the flip side, the strong economic showing may provide some much needed support for the greenback, which could temporarily diminish Gold’s appeal as an investment. Over the long-term, Gold still has much appeal for investors, especially if the US government continues to add to current deficits.
The fact that the Dollar has dropped as drastically as it has in the past few months, however, hints the currency may be seeing a bounce in the upcoming month, if for no other reason than simply correcting. This may put downward pressure on the price of Gold, which may test the resolve of Gold bulls if prices test the $1,000 an ounce level once again.
Technical Notes
The December Gold chart shows prices forming a small M top between 1050 and 1070. This pattern was confirmed and prices made the measured move by testing the 1030 level yesterday. This leaves the short-term direction of the Gold market up in the air. The December contract is trading near the 20-day moving average. A significant close below this average could suggest that a near-term high is in place. The stochastics, just like the chart, are neutral at the moment.
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About Mike Zarembski
Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.
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