Morning Futures Roundup

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Gold Just Keeps Truckin'

 Fundamentals

Gold futures rallied to new all-time highs in overnight trading, catapulting off the back of the weaker US Dollar. The resilience of Gold can be attributed to the mounting concerns that the global recovery is stalling and could be on the verge of a double-dip recession. Despite the surge in overnight trading, the market could be considerably choppier until tomorrow's FOMC rate decision.

The consensus opinion is that rates will be steady, but the policy statement will have a very cautionary tone and hint toward the Fed's "all options are on the table" attitude. The Fed will not go negative with short-term rates -- America is very different from Japan -- but the aggressive treasury buying by the central bank has brought down the back end of the yield curve and allowed the US government to finance cheaply.

In effect, it is a way to lower rates without lowering rates. Both the guarded optimism the Fed is likely to express and the liquidity injection likely to be undertaken play into the hands of Gold bulls. The more aggressive the central bank gets, the higher the likelihood of a sharp upswing in inflation down the road. Long-term bulls have never left the markets, as evidenced by the massive amount of Gold held by ETFs, but speculators have also gotten into the action and exhausted short-holders, which may finally result in Gold testing the $1,300 level.


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 Technical Notes

Turning to the chart, we see that the December Gold contract has broken out above the 1265.50 level. Several closes above this mark can be seen as confirmation of the breakout. Support can now be seen coming in at 1265.50, but where the market may find resistance is an unknown, as the market is in uncharted territory at the moment. There may be obvious psychological resistance at the next even level of 1300.00, and the market could also find stout resistance at 1345 on the upside. The RSI is overbought at the moment, but this indicator can be seen as less significant when the market is breaking out. In fact, there are many instances where prices make their most explosive moves when a breakout coincides with overbought or oversold levels.

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