Gold Forecast for the Week of December 19, 2011

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Gold markets had an absolutely brutal week over the last 5 session as the “risk off” trade came back into vogue. The $1,550 level has held so far, and the Friday session showed that the $1,600 to $1,500 level will more than likely produce a bounce, which would make sense as the fall was so massive and over such a short amount of time. The overall look at the chart shows that the highs are getting lower, so this bounce might just be that – a bounce. Either way, we would be willing to buy on the idea that this market should regain some of its losses recently. However, this is a trade, and not an investment as the $1,700 level might be overly resistive this next time around.

The European situation continues to upset the general attitude of the markets, and as long as that is the case, the Dollar will get a bid. The selloff lately in this market can also be thought of as yearend position squaring, and the next couple of weeks will be very light in volume. The light volume could produce fireworks as the lack of liquidity can exaggerate moves. The mood of the market going forward will be determined by the $1,500 level. If the area gives way, there is a real chance that we see a serious move down, with $1,350 being a real possibility at that point. The bounce that we envision looks to be good for about $100 or so, but the headlines in Europe can always throw a monkey wrench into the progression of the markets.

The rise of the Dollar seems to be the biggest thing that is working against the value of gold. It is most certainly not the certainty in the markets. The markets are showing that the situation in Europe will continue to take front stage in the next year, and the headlines will have to be watched. The overall long-term uptrend is still up, and we think that will return to the markets, but we think it could be next year before we see a return to that tone.

Gold Forecast for the Week of December 19, 2011

Gold Forecast for the Week of December 19, 2011

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About: FX Empire Analyst - Christopher Lewis

Christopher is a part of the FXEmpire.com analysis team. He writes Forex and Commodities technical analyses on daily and weekly basis. Christopher writes his analyses in a professional and yet simple to understand manner. His analyses are available in both text and videos.

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