What a burst of energy!!

Gold is up as traders seeked refuge from equities. There are concerns over the familiar Eurozone debt crisis and the US debt default problem. Fears are that it will spill over into larger economies like Spain and Italy that might couple with a surprise interest rate cut from the Swiss National bank and a Japanese currency intervention.

Friday’s much anticipated non-farm payroll reports bested estimates with 117K jobs, easing concerns that the US may be falling back into recession. However equity markets did not rally until news broke that the ECB was preparing to purchase Italian and Spanish bonds in an effort to stem the risk of contagion. In return the central bank will require Italy to make more significant reforms to stabilize their finances. Subsequently equities reversed the sharp declines seen earlier in the session, with gold quickly going back on the defensive.

While today’s employment figures bode well for the domestic economy, investors will be eagerly anticipating next week’s FOMC meeting where the Fed will give its growth outlook for the coming months. Traders will be looking closely at the Fed's assessment on Tuesday.

And although gold has rallied, it remained well anchored above the $1650 mark. This suggest that traders remain bullish on the metal amidst all the current global problems. It has remained within a well defined ascending channel dating back to late 2010 with a Fibonacci extension taken from the January and July troughs revealing interim support at the 61.8% extension at $1645. A break here eyes subsequent floors at the 50% extension at $1615 and $1580. Interim topside resistance is seen at $1665 backed by the recent all-time high of $1680 and the $1700 mark.