Gold Reaches Our Target but What Next?

Gold prices managed to reach our target of 1200 and for a short while yesterday, it did look good for more as well on the back of some serious dollar weakness during the course of the day yesterday. But late into the NY session, some dollar strength returned and this caused a correction in the gold prices and it trades below 1200 as of this writing. This is exactly the kind of price action that we had been mentioning in our forecasts over the past few days where we had mentioned a target of 1200 once 1180 broke and we had mentioned that the action in the 1200 region would be crucial to see if this upmove in the gold prices would turn into a full blown change of trend in the gold prices which would make it go higher or whether this would be just a correction in the larger downtrend that the gold is under. So far, the prices have behaved as we had expected them to and it look like the 1200 region might be a tough one for the bulls to crack but it also depends a large part on the strength of the dollar and whether the small dollar strength that we are seeing now is likely to continue and grow into a full blown trend or whether the dollar is going to fall back again. In this aspect, the retail sales and the CPI data from the US would be watched closely and if this data comes out good, we may see further strength in the dollar and some more correction in the gold prices.

Oil prices continued to hold steady as the production cut agreement continued to be implemented and it seems to be holding on well so far. There have been some minor hiccups along the way as some producers like Iraq, who are not part of the agreement, using this time window to increase their production and sell more and this has ensured that the oil prices do not make their progress towards $60 which is the price region that the oil producers would have looked for when they signed up for the deal. The longer that the oil prices stay near $50, the more pressure on those who have cut their production and one thing or the other is then bound to give way.

Silver prices, as predicted, continued to follow the gold prices as they soared during the early part of the day and then corrected towards the latter part of the day in line with gold prices and dollar strength and the same is expected today as well.