(OroyFinanzas.com) – The dollar behaved as expected last week, reacting back from an extremely overbought condition, only to turn higher again towards the end of the week, and gold’s action was the inverse of the dollar action. The dollar does look set to run higher towards the 85 area shortly, which is expected to result in gold continuing to test key support in the $410 – $420 area.

Unless the dollar continues to drive higher than the 85 area, which is possible but considered unlikely, then gold should base above its long-term trendline before beginning a new intermediate uptrend. In addition to the long-term uptrend line there is strong support in the $410 – $420 area arising from the considerable volume of past trading in this area, which is why a break below $400 would be viewed as a negative development that would usher in a lengthier correction. However, the most probable outcome is a test of this support followed by a new uptrend, as now appears to be happening with oil. We will be watching this with interest, as should an intermediate base now develop at and a little below the current price, it will signal a fresh intermediate uptrend in gold stocks.

Clive Maund

Source: www.clivemaund.com

© OroyFinanzas.com