December Gold:  Open= 625.5  High= 629.0   Low= 624.8   Close= 628.7   Change: +6.6

Gold prices continue to consolidate above $620 an ounce.  Appearing on the December daily chart is a bull flag formation, indicating that prices are preparing to move higher.  Solid demand lies beneath current prices, keeping dips well supported.  The next close objective higher is to close above $630.

Supporting the market has been the thought that Central Banks are diversifying away from the dollar and moving into the Euro currency and gold.  Gold bugs might expect this news to sending the dollar crashing down but it likely won’t have that deep an impact. Gold is trading as a third currency at this time, not just a physical commodity.  Hence, prices stabilized and rallied while crude oil fell, inflation is less a concern, yet gold rallies, and geopolitical tension has subsided somewhat, and yet gold has rallied.

A few upcoming events are likely to impact gold here in the next week.  First, energy prices are firming, with crude oil back above $60 and gasoline close to making a bottom.  Over the past six weeks, gasoline stocks have decreased 11%, putting supplies on the low end of the 5 year average.  Much as been made above relatively large supplies of crude oil, but the balance sheet on the products tells another story.  Low prices have stimulated demand.  So the market may turn higher without OPEC even cutting production.  Suffice to say that higher crude prices will be supportive of gold.

Secondly, First Notice day is right around the corner, on the 30^th for many Dec contracts, including the metals.  Profits will be taken, positions liquidated, and then the process of moving into new positions begins.  All of a sudden ‘new’ money is back into the market.  New positions must be bought.  Profits from one sector might move into another more promising area.  It could be a quiet transition but it also could spur a technical breakout above current resistance.

Bulls need to make a solid close above $630, preferably above $632, to break out of the bull flag and current trend line.  $650 is the next upside objective, though the recovery zone could be as high as $670. Support moves up to $625, $622, $620, $618. Resistance is seen at $630, $632, $637, and $640.

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