Gold is sitting at critical support on the weekly chart. As you can see below, the 61.8% retracement of the 2008 lows to 2011 highs are being tested once again:

On the daily chart, you can see that gold has been well bid despite the recent bounce back in US Dollar overnight. However, if gold breaks above 1180 (or so) we may start to see traders looking at long gold trade from a favorable risk/reward point of view. And if the FED and ECB are correct, and the deflationary forces we are feeling are transitory, perhaps inflation will tick up in the coming months, and provide a tailwind for gold.

Personally, I don’t think this is the bottom in gold, but from a technical perspective I don’t think we can rule out a move back to 1250 or 1300.

Blake Morrow

Chief Currency Strategist, Wizetrade