In the aftermath of the Fed-led, US dollar injection into the global financial system earlier today, all eyes should be on spot gold prices because a world awash in liquidity just became more awash in liquidity. If nothing else this should drive more flight to safety flow into the precious metals as a hedge against either a forthcoming bout of serious inflation or failure of the central banks to stem an apparently exacerbated credit (deflationary) squeeze.

In any case, let's watch gold carefully here to see if it can overcome key resistance along the Sep-Nov resistance line, now at $1763, which if hurdled should trigger upside continuation towards a retest of the September high at $1921.50.

Failure of gold -- and the SPDR Gold Shares (GLD) -- to do so will be cause for concern, and grounds for long liquidation that revisits key support at $1770/60 thereafter.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.