Gold will trade higher in 2010.

Today sees the release of PMI/ISM Manufacturing indices for major economies. After a good reading from China’s PMI index early this morning, risk appetite is good. This is benefiting commodities including precious metals. Precious metals are also benefiting from a slightly weaker dollar.

While there is good buying interest this morning, the week ahead is data heavy and as a result buying could drop away as the week progresses. Most notable is Friday’s US non-farm payroll data which has been instrumental in triggering the current dollar rally, after the much better-than-expected November payroll figure.

With gold close to $1,100 dips are likely to be bought. Buying stops in gold were triggered at $1,006 and there remains good buying interest on pull-backs. More buying could be triggered should gold move above the $1,120 — $1,122 level. Gold support is at $1,100 and $1,090 while resistance is at $1,116 and $1,122. We continue to see physical buying in the gold market.
However, as we head into Q1 (a low seasonal period) we could see this demand slow and as a result we would not get too bullish on gold just yet. Overall we still believe gold will trade higher in 2010.