Gold Has Sights on $1800 Prize Heading into Year End

November 26, 2012 4:27 PM EST
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With $1740 per ounce now a notch on the belt, gold investors have their sights set on $1800 per ounce. From a technical perspective, there doesn't appear to be major of resistance on the way up, say traders, though stabilization or a rise in the dollar index may create headwinds.

On Friday, USD Index dropped below 80.50, helping push gold prices to $1750, where it appears to be consolidating this Monday. If gold manages to push its way back to $1800 per ounce, it will be the fourth test since November of last year, with the three prior moves ending in utter failure as investors lost their nerve.

Gold topped out at $1920 per ounce in September of 2011, since then trading has been choppy with a downward bias. That trend changed this summer when gold broke out of its trading range and quickly ran up to $1800, testing year-to-date highs on news of QE3 in the U.S. The move was short lived, however, and gold was soon back trading back below $1700. Like listening to a familiar tone, that trend too would soon reverse.

Will this time be any different?

$1800 has been gold's title fight, and like a boxing champ who lost his title, the metals has been fighting its way back to the top time and time again. There is no doubt gold still has plenty of big names in its corner, with notable hedge funds like Paulson and Co. owning major stakes in gold backed ETFs SPDR Gold Shares ETF (NYSE: GLD) and iShares Gold Trust (NYSE: IAU). On the other side, value investors like Warren Buffet say there is better opportunity elsewhere.

In any case, gold bugs and critics are likely to have plenty to hoot and holler about heading into year-end, as futures markets become thin, which could prove to be a harbinger for increased volatility in metals.

Gold's trusty side kick, silver, and iShares Silver Trust ETF (NYSE: SLV), is also likely to see plenty of action.

It may not be obvious yet, but Friday's rally in gold was a signal to the markets. For those who missed it, the sound went something like this: ding, ding, ding.

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