2009-08-05

Gold Price Likely To See A Broken USD960 Level This Week















The dollar plummeted yesterday, from $1.4250 against the euro to $1.4440. With risk appetite rising, US Treasuries are being sold off — leading to dollar weakness. Equity markets continue to rise, and the S&P broke above the 1,000 resistance level yesterday for the first time since November 2008.

Eurozone PPI came in at a slightly better-than-expected 0.3% m/m rise. This is significant, in light of tomorrow’s ECB interest rate decision. With inflationary pressures higher on a m/m basis (although still very low), it adds to the reasons why the ECB might keep rates at 1% — something we view as supportive of the euro.

















Gold failed to take full advantage of the dollar. There was good physical selling with gold above $960, a pattern which we expect to continue. Gold resistance remains in the $960 – $962 area. A break below $950 could see gold test $945, and then $935.

Two possible outcomes are (1) surprise dollar rally, and (2) no dollar rally. If we get a surprise dollar rally off, say, 74, then gold won't pierce $1,000 for 3 - 6 months. If no dollar rally ensues, the gold price will break thru $1,000 early in the fall, then run to US$1,300 very fast.

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