Euro vs. Dollar Battle = Gold Wins

Fundamentally:

This last Correction in Gold could be an opportunity, here are some of the fundamental reasons:

1- As long as the Dow Jones index stays under 10,500 there will be Market uncertainty and investors could find refuge in gold..

2- New Government spending can lead to a 14.3 trillion deficit pushing USD down. This move could be consider as "a crime against the dollar" and a total loss of confidence in the currency which historically leads to a "fly to commodities". This would also support the thesis of a "Competitive depreciation" (under Forex).
REF : Democrats Propose $1.9T Increase in Debt Limit , abc News

3- Fears of inflation: If you open an economic book one definition of interest rates is "the cost of money". Interest rates at 0% just means money worth nothing. The rest is only details.
After the nomination of Bernanke as "Printer of the Year 2009" he will probably be reappointed and let Wall Street get cheap money a little bit longer.
Article: Ben Bernanke- Person of the Year 2009 - TIME

Meanwhile, the federal reserve disclose ambiguous reports about an eventual increase in interest rates, such announcement would definitely dive Gold prices down. The truth is that it is a typical manoeuvre to create the illusion of a controlled exit strategy and a slow increase in interest rates while they won't.

All those reasons leads me to the conclusion that the dollar will drop at term. As I explained in my 2010 forecast, USA and Europe will alternatively release currency depreciative news in the competitive depreciation race (described under FOREX in my previous post 2010-What's Next?). Thus, I consider there could be great swing trading opportunities in USD/EUR pair. However I consider Gold could develop a more sustainable growth.

What would make this analysis invalid would be:
- Better than expected job results
- Raise in interest rates (very unexpected)
- Default fears in Europe (Greece or Spain)

Technically:

EUR/USD Technical Analysis:

(Click image)

Gold Technical Analysis: