Matt, here's my take ...First off, the USD. Two weeks ago I felt...

Matt, here's my take ...

First off, the USD. Two weeks ago I felt it had the legs to run up to 81. Not quite. 80 pulled it up. Spinning Top candle on the USD weekly chart below signals a turn. A 50% retrace would take it back to the 76.5 area. The Louise Yamada blog on KWN today spells out the inverse relationship between the USD and gold so the USD decline will give some legs to the gold price.

Second, your (verbal) short term channel points to the 1750-60 area which is where I expect this next B-wave leg to stop. The long term mid-channel line points there as well.

Third, COT data is a bit stale already but the red numbers in the very middle of the table below add to the bullish case. The number of 'commercials' open short contracts dropped by 11,182 in the week to Oct. 4th whereas the number of open longs dropped by 7,637.

Total Open Interest dropped 20.5K so the traders are seeing the gold situation as somewhat ho-hum while it consolidates. The interest is elsewhere in the broader market. That's seen in the growing bullish % index of the broad NYSE exchange.

At the fundamental level, the QE announcement in London this week will set up a bit more UK demand for bullion as the pound sterling value erodes.

Just my views and charts for the next week.