December Gold traded up to another six month high early this morning, up to 1749.5 before selling off by mid-morning.
A ruling announced overnight by the German Constitutional Court that gave the green light for the country to ratify the euro zone’s new rescue fund and budget package may have influenced this move. This announcement is seen as another step in the right direction to preserve the Euro and aid peripheral nations such as Spain and Italy using bond purchases, to lower their borrowing costs. Bond purchases by central banks are most likely seen as inflationary and have coincided with a seven percent rise in the Euro since July, after the ECB pledged to do whatever it takes to preserve the currency.
Gold however couldn’t hold these gains and traded down just through a support level to make a daily low of 1727.3.
Once again new highs were met with some spec selling as a possible QE3 announcement tomorrow afternoon possibly has some investors divided as to if the Fed will add more stimulus. Therefore I am looking for another two sided technical trade until the Fed and Bernanke speak tomorrow afternoon. 2012 highs in the Gold are up at 1800 and I wouldn’t rule out a test up at that level by week’s end, if an aggressive package is announced tomorrow by the Fed.
Conversely, if the Fed continues a wait and see posture on the economy, similar to what they have been saying after the last few FOMC announcements, look for a retracement back down to 1703, and if penetrated, 1667 basis December.
Daily Swing #s GCZ2 (9/13)
Resistance#2 – 1759.0
Resistance#1 – 1746.3
Pivot – 1736.8
Support#1 – 1724.1
Support#2 – 1714.6