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Gold is still held captive to the interest rate markets and always will be.

To understand the recent recovery rally in the metal, all one needs do is to look within the shaded rectangle that starts in November.

As interest rates have moved lower, the metal has moved higher.

Until the market returns to pushing long term rates higher, gold will find support, especially in light of the strong physical market offtake in China ahead of their New Year.

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The metal is closing in on tough resistance near $1180. A push through this level should bring a test of $1200 into play. The fly in the ointment could be tomorrow’s payrolls report.

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