Over the last three weeks, the 100 day moving average (currently at $1,106) has rejected gold’s advances on four separate occasions. Yesterday’s equity market sell off finally encouraged enough safe-haven bids to lift gold over this hump though. Traders who were short gold ahead of the 100 day moving average were forced to cover positions which has allowed gold to reach three month highs this morning. Should gold’s momentum continue upward, the next major resistance level is the 200 day moving average at $1,133, a technical indicator it hasn’t been above since October of last year.
Gold’s inverse correlation to equities has been particularly strong lately. The fact that gold is up today while equites are also moving higher is a good sign that it wants to challenge new heights in the near term. Recent physical statistics also give credence to gold’s price action. Chinese gold imports from Hong Kong surged to the highest level in two years in December, rising to 3.56 million ounces from 1.89 million in the same month a year ago. Gold ETFs have continued to add to positions this year with the largest SPDR ETF currently standing at nearly 21.5 million ounces. While not expected to cause too much market angst, keep an eye out for tomorrow’s FOMC meeting.