Gold shattered overhead resistance near $1680 and has continued higher as momentum based buying is coming in driving out panicked shorts who were hoping for a halt in the advance to occur as the market encountered bullion bank selling originating at $1680. The FOMC made that a mirage as a zero interest rate environment for the next two years means an environment in which it pays to own gold. The yellow metal pays no interest but at this point, neither do short term Treasuries and those offer no protection from currency induced price increases. Just look at what is occuring across the commodity sector today as hedge funds now push the price of food, energy and metals in a northerly direction. Forget about tame inflation - that just vanished.
The sheer size and scope of this fund buying has driven out everything in front of it except for the strongest of shorts.
Gold has light resistance starting at $1705 (it is right on this level now) or so and extending towards $1720-$1725. The latter is the important 50% Fibonacci retracement level from the all time high to the recent double bottom down near $1535. The bears are going to make a stand near this level. If the fund buying remains as robust as it was today - the bears are going to be routed. Pushing through this cap will set it up to make a run at $1750. If the shorts can defend $1720 - $1725 then we should see a retracement back towards the $1700 level initially followed by $1680 where support should emerge.
By the way, the HUI and some of the gold stocks dodged a very big bullet today courtesy of the FOMC. They were in severe danger of breaking down technically.
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