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Gold Drifts on Profit Taking After Last Week’s Gains; Still Technically Strong

September 10, 2012 – Price of Comex gold futures drifted Monday morning from last week’s gains that brought prices to a new six-month high on Friday at $1,745.40 per troy ounce on the contract for December delivery. Modest profit taking in addition to a technical correction toward the downside is being seen Monday. December gold traded down $8.40 to $1,732.10 per troy ounce. The spot price of gold drifted $5.75 to the $1,730 per troy ounce line. December Comex silver dropped slightly as well, at $0.20 to $33.48 per troy ounce.

Focus this week is mainly on the policy decision meeting of the U.S. Federal Reserve’s Federal Open Markets Committee, which will commence on Wednesday and end on Thursday with a press conference from Fed Chairman Ben Bernanke. The weak U.S. jobs report released Friday, which indicated fewer jobs were created than were expected, has increased the expectations for stimulus measures from the central bank.

European stock markets are stable and quiet ahead of the FOMC meeting and after last week’s announcement the European Central Bank will pursue unlimited bond buying. Markets also await a German constitutional court ruling on Wednesday on the validity of the European Stability Mechanism. More underperforming economic news emerged from China overnight as the country’s trade surplus widened and imports declined. Industrial production in China slowed in August. Asian stocks were narrowly mixed in overnight trading.

The London A.M. gold price fix is $1,732.75 against the previous A.M. fix at $1,728.00 per troy ounce.

According to Forbes’ analysis, gold prices are in a two-month uptrend on the daily bar chart and the gold market bulls have a solid overall near-term technical advantage. December gold futures prices achieving a six-month high Friday constituted a bullish outside day on the daily bar chart, meaning the high is higher and the low is lower than the previous trading session’s range. For gold bulls, the next price breakout point on the upside is the technical resistance level at $1,750.00 per troy ounce. For bears, the next near-term downside price level is a close below the psychologically important $1,700.00 per troy ounce level.

Resistance is seen first at Friday’s high of $1,745.40 per troy ounce and then at $1,750.00. Support is seen at $1,725.00 and then at $1,716.90.

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