The Gold Bugs Index, representing unhedged gold miners, threatens to break through resistance at 600 which would signal an advance to 700*. Upward breakout would negate the earlier bear signal from penetration of the rising trendline — as well as strengthening prospects of a further advance in the spot price.
* Target calculation: 600 + ( 600 – 500 ) = 700
Spot gold has so far respected the secondary trendline and support at $1750. Short retracement from resistance at $1850 would be a bullish sign, suggesting an upward breakout. Recovery above $1900 would test $2000, though the calculated target is even higher*.
* Target calculation: 1900 + ( 1900 – 1750 ) = 2050
Upside potential for gold remains strong. Treasury and the Fed are running out of options to revive the economy and further quantitative easing grows ever more inviting despite the inflationary outcome. With presidential elections looming in 2012, the White House will also be doing their best to influence the Fed decision.