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Quick Take: Gold at $1,400 More Than a Dream

NEW YORK ( TheStreet) -- Gold prices are taking a breather on Tuesday after a solid pop on Monday. Is the next leg going to be higher or lower from these levels?

Independent commodities trader Eric Zuccarelli told TheStreet's Joe Deaux that demand for physical gold has been much stronger, with Comex inventories dropping from three million tons last quarter to 800,000 tons currently.

This type of activity usually leads to another leg higher, he added, although he doesn't exactly consider himself a gold bull.

He noted that when gold was making all-time highs around $1,900 per ounce, not many people were taking physical delivery because future prices remained elevated over spot prices.

However, we now have spot prices trading higher than future prices, creating what is known as backwardation, where investors are willing to pay a premium to take an earlier delivery of the metal. Zuccarelli added that this can also be seen as a sign of tightening supply.

He concluded that for gold to go higher, it would need to take out its near-term resistance of $1,350 and could possibly surpass $1,400 per ounce in the short term.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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