Gold Technical Analysis October 11, 2011

Gold markets rose on the Monday session as traders got very bullish equities and “risk on” trades in general. However, as the market has been so choppy lately, the smart trader is buying gold as a hedge against all of the volatility out there. The US Dollar found itself on the back foot during the session, and this also helped to propel the market forward.

The technical picture still looks to be in a consolidative phase, and that a base could be forming in order to resume the uptrend that we have seen over the last ten years. The $1,675 level seems to be the top of the range that has to be broken to the upside in order to get long in this market. The downside is protected by massive support in the $1,600 range.

The recent action in the gold markets has been a buying opportunity in an otherwise parabolic (at times) market. The pullbacks will continue to be seen as buying opportunities to us as we continue to believe in the gold story overall. As long as governments around the world are in a race to devalue their currencies, gold should continue to appreciate against most, if not all currencies. The gold market finds itself in a good vs. good situation – it is a “safe haven”, and it is also a “risk asset”, because of this, it can rise in both scenarios. This is why we are still so bullish on the yellow metal as it is one of the few markets that can claim duel status.