December Gold:  Open= 612.0  High= 619.7   Low=611.0   Close= 619.3   Change: +12.5

Resilience.  If one word describes gold currently, this would be the one.  In the face of rather a weak energy complex, gold prices rallied $18 over the past two days and almost $40 in the past ten days.  A gap open in the morning above resistance at $610 spurred technical buying and remained well supported through the day.  A close near the highs put prices back above the 200 day moving average and provides the highest close in a month and a half.

Crude oil is not the only factor to influence the price of gold.  It may dominate at times, but by no means controls direction.  So as the price of oil takes a secondary role, we search for the more influential contributor.  The US dollar comes back into focus as we approach elections in the United States.  The dollar index failed to move above 87.00 and subsequently has fallen to 85.00. There is good support down to 84 but the mood shift is more concerned.  A break below 85 will do damage to the chart. 

Uncertainty about economic growth is fueling the decline in the dollar, even with lower oil prices.  The numbers this week haven’t been supportive despite a 20% reduction in crude prices, which have been trading around or under $62 a barrel for the better part of 40 days now.  Suffice to say that $60 oil is not exactly cheap.

A quick review of the facts paints a bullish view for gold currently.  The dollar has weakened materially, gold has rallied without crude oil, and an inverted head and shoulders chart formation is seen on the charts.  While technical analysis may be the strongest support gold bulls have, it often is enough to push prices through stops or attract fund buying.  The market may be a bit overbought so some choppy action around $620 may be seen, as well as a test of support at $610.

Support comes in at $612, $610, $607, 605. Resistance is seen at $620, $625, and $635.

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