Gold faces resistance at $1000/oz

Gold today is facing resistance at $1000/oz. It reached a high of $998/oz before retracing to $989.20/oz. This is of course just the daily action, and there does remain the prospect of gold breaking this level yet. This has proven to be a strong level of resistance for gold. In fact, we can see weakness to the $750/oz support level.

Gold has attempted to break this level on three occasions - July 14th 2008 and Feb 12th, June 1st and now Sept 3rd in 2009.

One might well ask if gold is likely to break this resistance given the recent expansion in the monetary base. Certainly this is a bullish factor, though without signs of inflation, and the possibility of higher interest rates, I would be expecting weakness in gold before we see further strength. Of course we need not guess these things. we need only watch the market to give us the lead.
----------------------------------------------
Andrew Sheldon www.sheldonthinks.com

Gold price outlook

The gold price has shown some strength of late - rising $27/oz and $15/oz in the last two days respectively. It is questionable whether gold will break its previous resistance at this point. I am inclined to think that it will not, and that the gold price will once again settle back. These rallies of course make great opportunities to trade. Our view is that the support for gold is the $750/oz mark, though I see nothing which is likely to push gold that low, except perhaps a recognition that the economy is too hot, and the Fed needs to raise interest rates. This will likely occur within the next year. Of course it will never raise rates by the amounts required to rein in inflation; at least not until the dying moments when it has no choice. By this point, based on the following chart, we are expecting gold to reach a level of at least $US2200/oz. Of course this is an evolving story.
-----------------------------------------------
Andrew Sheldon www.sheldonthinks.com