Does this mean gold is all set to bounce back for correction following a financial burst? First, a financial burst of 2008 intensity is unlike. The fundamentals do not support this.
Gold futures in the Comex division of New York Mercantile Exchange could rise to $1,525 an ounce, however, according to Kitco.
That won't happen overnight. Second, the recent unemployment figures, nonmanufacturing purchasing managers' index and early tapering of the Fed's quantitative easing program have made investors more optimistic about the U.S. economy.
Additionally, the Fed intends to keep the interest rates low in an attempt to promote economic growth and reduce risk chocking of the economy. Whatever the case may be, not all risk can be eliminated. An economic slowdown is not yet out of the question, which continues to make gold an attractive investment.
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Gold traded to the upside after breaking a major resistance level at $1,334 an ounce. The move was mostly in favor of the bulls due to the news about Portuguese bank problems.
In addition, the upward move was also propelled by political tension in Middle East crises: Israel-Hamas, Israel-Gaza and Ukraine-Russia. However, it is yet unclear whether the upside surge was a result of new buying positions or stops triggered on the resistance level. It must be noted that the market closed lower at $1,338.21 after placing the previous week's high at $1344.91. This suggests that stop losses were triggered. An important level to look for is $1,334, which is the new support level. If gold traces back, it is expected that it will trade within the range of $1,309.69 to $1,334 per ounce for the next week.
Should the price fall to the $1,309 level, there is likely to be new buying. The $1,313.63 level is a major 50% Fibonacci level. Another important level to look for is $1,322.57, the center line of Bollinger Band or 20-day moving average. A successful defending within $1,322.57 to $1,330 will indicate that bulls are coming in with new buy positions.
For this week, investors are also advised to keep an eye on key U.S. data including retail sales, industrial production, unemployment claims and the preliminary University of Michigan Consumer Sentiment reading. In addition to this, new data are also expected from the world's second-largest gold buyer, China, which is set to release its GDP and industrial production figures.
Should the gold market move upward, the first resistance level to look for is $1,355 per ounce followed by $1368.89 and $1,389.54.
In sum, it is expected that gold will show a minor bullish trend this week but is not expected to break the $1,368.89 resistance level. But gold is expected to fall in the next week and will remain at a low price in next month.
At the time of publication, the author had no positions in assets mentioned, although positions can change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.