By FXEmpire.com

The gold markets fell slightly on Monday as the trading world comes to grips with the French, German, and Greek election results. While much of it would have been expected, the initial knee-jerk reaction was to sell the Euro, and in turn buy the US dollar. As is usually the case, this weighed upon the gold markets and pushed prices lower in the earlier hours of Monday trading.

However, as it has so many times, gold proved that it was capable of holding its own against the bears. The $1,640 level continues to be very supportive, and if the sellers of the gold markets wish to make any real headway – this level will be vital for their fortunes.

The longer-term trend line that can be found on the weekly charts is in this area as well, so it is easy to imagine that there would be a sizeable amount of support in the neighborhood. The $1,600 level underneath that would be very supportive as well, so it looks as if the easiest path is still higher in this market, even as we chop around a bit.

The $1,500 level below is where we think the market gets seriously bearish, and until then, we feel that there is going to be a ton of support. With this in mind, we only buy gold or stay flat. We simply will not sell as there is so much interest.

With all of the issues around the world with central banks easing, and the debt crisis in Europe, it is easy to imagine that there will be a continued bid for gold. Although there are going to be deflationary concerns, the fact is that someday there is going to be massive inflation with all of the easing that is going on, and because of this it is going to be difficult to find a currency that will outperform gold in the long run in our opinion. A break of the Friday hammer is still our buy signal, and we intend to take it if we get that move.

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Originally posted here