Tuesday, December 1, 2009

Milestone Reached

Shortly before noon ET, spot gold made it to US$1200/oz. As I write this post, the spot price is $1198.40.

The next few days should be interesting. $1200 is a significant number because more than a few professional goldbugs have made it a very public target price. Consequently, there's a lot of significance attached to gold at $1200. Some may well decide to sell and take a profit now that the target's been reached. The emotional significance of the number, as a milestone, makes it a strong "resistance level" in techical-analysis jargon. In non-jargon, it's a price at which many participants are tempted to sell.

If gold goes through $1200 and stays there, and does so without a long slog at the near-$1200 level or an outright spill, then that potential supply overhang will prove to be not much of one. Technical analysts interpret this action as good news, as it's a sign that net demand is still strong.


[H/T: the late Harry Browne. I got the interpretive framework for resistance levels from his books.]

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