Gold Bulls Fight Back

It looks as though the Fed is prepared to feed the market's addiction to cheap money, which can be seen as favorable for Gold futures. If the Fed is successful in stimulating the economy, food inflation could be joined by inflation from other raw goods. Technically, it looks as though traders finally received their wish, as the market has broken out of the wedge that has been forming over the past several months.

Fundamentals

Gold futures have rallied to their highest levels since early May after the FOMC Minutes left the door open for more stimulus from the Fed. The minutes indicate that "many members" of the committee believe that the Fed needs to be more accommodating unless the US recovery picks up again. More liquidity from the Fed can be construed as negative for the US Dollar and, as a result, likely bullish for Gold. Also, stimulating growth could spark inflation, which outside of food prices, has been relatively tame. According to Bloomberg, total Gold assets in ETFs/ETNs are up to 2,442.26 metric tons.

Technical Notes

Turning to the chart, we see the October Gold contract breaking out of the 3-4 month wedge formation to the upside. The measure of the move suggests that the Gold contract could attack the 1750 level. The next significant upside test comes in at the 1700 level. Currently, the RSI is overbought, which may cool buying pressure in the near-term.