Gold: Consolidation Is the Best Way Forward
Source: Mineweb.com (12/6/07)
The prognosis is positive for the New Year, but with the year-end approaching there is a distinct possibility that there is more position cutting to be done. There is increasing resistance at $800, both on a psychological and technical basis.
Gold's most recent retreat coincided with a reduction in the CboE VIX uncertainty index over the last week of November from just less than 29 to just below 23, coupled with a very impressive rally in the equity markets. The S+P 500 and the Dow Jones both gained 5% in the last week of November, while the FTSE 100 and the Nikkei rallied by 4%. This is partly because Mr. Donald Kohn, the Vice-Chairman of the Federal Reserve, has strongly suggested that there will be another rate cut from the FOMC in December following the combined 75 point reduction that the Committee has put in place since late September. Dr. Kohn said in late November that recent turbulence in the markets might mean that the restriction on credit availability, both in the corporate sector and with respect to private individuals, might be greater than previously imagined and that the risks to economic growth had increased. The fed funds futures markets are now pricing in more than a 90% probability of another cut in rates on 11th December, taking the fed funds target rate to 4.25%.