Where is GOLD headed, and WHAT DETERMINES its direction?

Gold has been inching up quietly in the last few weeks, and not many are taking notice because there haven't been any monster moves. But the way it's shaping up on the charts, we could see some huge movements coming in the next few weeks. Coincidently, gold has been in an uptrend ever since November of 2008 (click on the chart below for a bigger picture in a new window), when the financial crisis was unfolding at a rapid pace. It' has formed higher bottoms, has never reached the November 2008 lows and is approaching the previous tops made in Aug-08 and March-09, which are all pretty bullish signs. Here are some things to watch out for when trying to forecast gold's future movements. 

1. The continued weakness of the US dollar is contributing heavily to the rise in gold. If the dollar continues to depreciate against major currencies, the uptrend in gold might continue. 

2. Gold is comfortably above two critical moving averages (the 50 day and 200 day moving averages) which is a very bullish sign on for commodity traders. 

3. The technical formation on gold is very bullish as volume has also been picking up slightly in the last 2 weeks. 

4. Gold has massive resistance between $1000-$1020 which is a very critical band. If gold consolidates there and lacks strength as it reaches that price, it can correct back to the $900 levels. The other scenario which is more likely is that gold will shoot through this resistance with good volume and reach $1100-$1120 very soon. 

5. Fundamentally speaking, if the, "green shoots," sprouting in different economies turn out to be weeds, i.e. a false signs of recovery, then gold is the safe haven that everyone will rush to, which should send the price of the yellow metal up another 15-20 percent. 

6. Many countries are slowly and silently divesting tiny portions of their US treasury holdings in their foreign exchange reserves and funneling them towards gold. In fact, if the dollar crashes gold prices will SURGE so this acts as a small hedge in many cases. 

7. If the commodity bull market resumes and initiates its second leg, then gold might see historical levels very soon. 

NOTE THAT THE CHART BELOW IS FOR THE GOLD ETF GLD. THIS ETF APPROXIMATELY REFLECTS 1/10TH THE PRICE OF AN ACTUAL OUNCE OF GOLD. CLICK ON THE CHART BELOW FOR A CLEAR PICTURE. 

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