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Where Are Gold Prices Going From Here?

|Includes: SPDR Gold Trust ETF (GLD)

The month of September is usually a positive month for gold prices. This is historically a very strong season for gold demand in India as they celebrate the new calendar year and buying gold during this time is a tradition for most of the population. As Europe comes back from a long vacation period in August, the liquidity begins to come back to the world markets once again.

But where are gold prices going from here? As we commented in our last report, the gold market appears that it got ahead of itself in anticipation of the September FOMC announcement regarding U.S. monetary policy causing the market to pause and consolidate at current levels.

The highly publicized and anticipated QE3 announcement by Mr. Bernanke was not the surprise. The ambiguous manner in which it is being executed caught many market participants offguard. The no-end QE3 announcement to supply the economy $45 Billion a month seems to be a drop in the bucket.

With our current government controlling more than 30% of the economy, it seems a very difficult task for the private sector to show any growth possibilities without private or government assistance. With 47 million people of the U.S population using food stamps, the path of least resistance this government unfortunately has chosen is the creation of more money. Historically a very inflationary and destructive path for the U.S. Dollar as the world's reserve fiat currency.

With the U.S. Dollar losing more than 98% of its purchasing power since 1971 - the current budget deficit at more than $16 trillion and rising - the future and integrity of the U.S. Dollar as the world's reserve currency certainly becomes more questionable.

This is a very positive fundamental picture for gold demand in general as a potential safe haven long-term. The financial markets will look at gold as an alternative currency investment hedge and gold will become more accepted as a negotiable instrument. Individual investors will look at gold as a hedge against inflation.

With the gold market reaching a high of $1785.90 last week, it has completed what most Fibonacci technicians call the 61.2% retracement. This is a Golden ratio number of major importance. This tells us the market has met and completed all the criteria for short-term price objectives. If the price were to close above $1785.90 on a weekly basis it would negate this analysis and it would set the stage for the next leg up to challenge the all time highs made on September 6, 2011 at $1,934 per ounce.

Let's take a look at the gold and silver charts and see what the technicals are indicating for the near-term price outlook.

Click HERE to enlarge.

The August (Comex) electronic gold contract closed at $1.7745. The 52 week Range is: $1,535 - $1,815.

The market closing above the daily 9, 18 and 36 day MA's on a weekly basis is confirmation the trend momentum is bullish.

With the market closing below the VC Weekly Price Momentum Indicator of $1.777, confirms the price momentum is bearish. Look to take some profits if long as we reach the $1.784 to $1.793 levels early next week. If stops are taken out here, we could see a rally up to the $1.800 to $1.815 weekly resistance levels.

Buy corrections at the $1.768 and $1.760. levels to cover shorts and go long on a weekly reversal stop. If long use the $1.760 level as a SCO/GTC ( Stop Close Only and Good Till Cancelled order).

Click HERE to enlarge.

The December (Comex) electronic silver contract closed at $34.56. The 52 week Range is: $26.20 - $37.65.

The market closing above the daily 9, 18 and 36 day MA's on a weekly basis confirms the momentum is bullish.

The market closing above the VC Weekly Price Momentum Indicatorof $34.40 is bullish. Look to take some profits if long as we reach the $34.89 and $35.20 levels early next week. If stops are taken out here, we could see a sharp rally up to the $37.50 to $40 weekly resistance levels.

Buy corrections at the $34.29 and $34.01 levels to cover shorts and go long on a weekly reversal stop. If long use the $34.01 level as a SCO/GTC (Stop Close Only and Good Till Cancelled order).