In The Intermediate-Term, Where Is Gold Headed?

By Jim Donnelly, Olson Global Markets

Amid renewed greenback weakness, the focus of those looking for dollar-induced inflation has been gold. When looking at the largest traded gold ETF (GLD) as a proxy, its price broke above key trend line resistance last week at the $97.50 level and inched slightly above that level to close at $98.67 on Friday.

While overbought conditions are now present on weekly charts, these oscillators are not yet excessively extended. This situation, which often accompanies a key “breakout”, suggests that more upside gains are likely to be scored as momentum buyers continue to buy and support the bullish case for gold.

With that in mind, a “measured move” extension drawn off key “channel bottom” support targets a move up to the $110 area for GLD. That roughly translates to a price of $1,125 for spot gold.

Of course, a solid break below former resistance (now support) at $97.50 on GLD would be a worry and could act as a big “yellow caution flag” for the bullish case.


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