Gold will push higher

The gold price advanced higher Tuesday morning, climbing back near $1,550 per ounce. The price gold traded as high as $1,545 per ounce, rising on the back of broad-based weakness in the U.S. dollar. The U.S. dollar traded lower against most of its trading partners, notably the euro. The euro climbed to 1.437 against the dollar early Tuesday.

Our focus remains on the interbank lending market in Europe. With Greece’s debt problems unresolved, the European interbank market continues to tighten. The stress in this market is not nearly at the same level as in 2008, but it is rising (as indicated by the 1m Euribor rates edging up). Strain in the interbank market could see short-term liquidity dry up. This could be extremely bearish for all assets, including gold. However, our base case is not for a complete freeze in money market activity. We still believe that gold will push higher.

Gold support is at $1,534 and $1,528. Resistance is at $1,546 and $1,551.

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