Gold Prices forecast for the week of December 10, 2012, Technical Analysis

The gold markets fell during much of the week over the last five sessions as markets continue to rocked back and forth based upon the so-called “fiscal cliff” negotiations in the United States, as well as a host of other issues.

We do see the $1700 level as significant support in this marketplace, so the fact that we have formed a hammer for the week isn’t overly surprising for us as we did expect the buyers to step in sooner or later. After all, we have the Federal Reserve looking more and more likely to add to its already astronomically huge position in the US Treasuries in the month of December, as well as possibly buying other assets in order to engage in a form of quantitative easing.

Because of this, the value of gold should rise against the US dollar. But it doesn’t stop there. The fact is that the European Central Bank looks ready to start thinking about cutting rates as well. They will be buying large amounts of bonds from peripheral countries, as well as simply “printing Euros.” This will drive demand for gold in Euro terms as well. Not to be outdone, there is the Bank of Japan looks even more aggressively dovish than both the Federal Reserve and the ECB. In other words, you will have a lot of the major central banks around the world printing fiat currency.

Going forward, if we can break the top of this past week’s hammer, we think that the $1750 level will be attempted yet again. However, we think the gold will go much higher than that in the end, and that $1800 is almost a certainty at this point. The trend is most certainly with the buyers and has been for a dozen years now, so buying is certainly something that we are very comfortable with in this marketplace.

As for selling, we do not see a scenario where we want to start selling gold at the moment. There are lot of contrarians out there that are willing to say that the rally is a bit “long in the tooth”, but the reality is that we’ve been hearing that since gold was printing a $500 price.