Thurs June 11 11:50 a.m. CT—Comex Aug gold futures have climbed off their lows and pushed into positive territory in midday action Thursday. While overall, the market remains within a larger range, the underlying bullish picture remains strong.
In recent weeks, renewed weakness in the U.S. dollar was the catalyst for a fresh upleg in gold action, pushing Aug gold from a low at $867.50 an ounce to $992.10 an ounce on June 3. Since then, moderate strength in the greenback occurred, which sparked a slight pullback in the yellow metal. But, no technical damage has been etched on the chart in recent sessions and the bulls continue to hold the edge.
Dip Buying
Just look at Thursday’s action. Early gains saw the market drop to $942.50, the lowest level since May 26. But, bargain hunting emerged to support the market back to north of unchanged. While it is still early and the session has not finished a “hammer” candlestick is showing on the daily candlestick chart. That merely underscores that there are buyers under the market, willing to support gold on pullbacks.
Commodities in General
With talk about possible inflation ramping up down the road, amid the massive global liquidity injected into the financial system by governments and central banks, other commodities have begun to turn up in recent weeks. Is the commodity bull market returning?
Gold held up pretty well, amid its safe-haven bid during the last year. Basis the weekly continuation contract, after hitting the all-time record high at $1,014.60 in March 2008, gold dipped only as low as $681 in October 2008 and has been climbing higher in a consolidative fashion since then.
Key Ceilings
Obviously, the key ceilings to watch are $1004.90/$1,014.60, basis the continuation contract. The key resistance, basis Aug gold is $1,008.90. While there are few guarantees in life, I’m willing to lay some good odds that we will see a run to and through those highs. Gold bugs are hanging around gaining momentum amid concerns about inflation amid the massive increase in U.S. money supply this year. It’s probably only a matter of when, not if. Even if a new high move is not sustained, there are too many traders focusing on those levels and who will be gunning for stops in that area.
MacNeil Curry, chief North American technical strategist at Barclays Capital told me that he believes gold remains within a secular bull trend. He sees the market as having been range-bound for the past six months. By year-end or first quarter 2010, Curry and his team at Barclays are targeting a move to the $1,100 zone in gold.
Technically or fundamentally it is hard to paint a bearish picture for gold these days.
Figure 1: Daily COMEX Aug Gold Chart
Source: E-Signal Market-Q