Gold probing upside resistance

Gold is garnering strength from overnight news that Greece looks to miss its debt reduction target. This is causing further fears about the well-being of Europe in general and is bringing in selling across the global equity markets.

What is noteworthy about gold in today's session is that it is making this move towards overhead chart resistance with the Dollar knocking on the door of the 80 level on the USDX. The European currencies, the Euro, Swiss Franc and British Pound are all under pressure today as are the commodity currencies. The result - gold is moving higher in terms of all the major foreign currencies, even the Yen, which is garnering its usual mindless safe haven bid.

Euro gold seems to be finding willing buyers down near the 1200 level.

As far as the technical chart picture for gold in US Dollar terms: Note the downtrending price channel delineated in red on the chart. Gold is now challenging the lower side of this channel after having dropped out of it recently. That is a very encouraging development. Also, that lower channel trendline meets up with horizontal resistance coming in near the $1660 level. That is what makes this level signficant. If gold can hold its gains here, it should be able to push back towards the formidable $1680 level. Above that we get $1700 back in play.

Asian buyers stocking up ahead of the festival season are no doubt keenly watching these developments. If they think that the hedge funds are going to come back in and take prices higher, they will buy at current levels ahead of them. If they believe that the mindless managers will dump more gold, they will take their chances and step back and let price come to their buy orders.

It is also not hurting gold to see the HUI continue rebounding further away from the 520 level, especially witnessing the selling hitting the broader S&P 500. That level thus far is holding like a rock on downside probes. The longer it holds, the more short covering we are going to see on the part of frustrated bears. Evidently, buyers see value in the shares at those levels. This index needs to clear 550 on a closing basis to rattle some of the fresh shorts whose short covering should then take the index towards resistance near 570.