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Gold continues to hold above the $1,700 support level, but barely…as of 8:45 am Pacific, bullion is down $7 an ounce at $1,701…Silver is off a nickel at $31.62…Copper, trying to break a 4-day losing run that has seen prices shed 4.8% and drop to a 6-week low, is off another 3 pennies to $3.55…Crude Oil has fallen $1.02 a barrel to $85.65 while the U.S. Dollar Index is up one-tenth of a point at 80.04…

As John pointed out in a chart yesterday, Gold has three important levels of support – $1,700, $1,670 and $1,640 with the likely bottom somewhere between those levels…

Gold Views – UBS & Global Hunters Securities

UBS

Edel Tully of UBS, one of the Gold market’s top analysts, observes: “There are two stories at play here – a short-term case of frustrated investors, disappointed that Gold hasn’t rewarded them with a +$1,800 price tag, but against this is another player, with a more strategic view who is either 1) not willing to sell into current weakness and/or 2) using the pullback to add to length.”

Either way, Tully concludes, Gold feels like its set for a big move…”Sentiment right now suggests that move is lower…but given how hard the metal is trying to hang on to price levels above $1,700, perhaps the big move the market is waiting for is actually north?…will this be gold’s trick or treat moment?”…

Tully adds that the moves down of late have been “without drama”…”The labored move lower in Gold is baffling many…from conversations with clients in recent days, nearly all expected a move lower and nearly all thought the move would be more painful than we’ve seen so far…is it just a matter of time?…perhaps…Gold is reacting to the mood that prevails across other markets with equities lower, Q3 earnings softer and the euro weaker”…

But, as she points out, while some are holding out for a dramatic move lower, many seem to be overlooking the fact that the metal has already given back nearly $90 from its October high…Tully goes on to say it is important not to underestimate the “deeper and broader held view that the current macro backdrop is gold positive”…

Gold To Surpass $2,000 In early 2013:  Global Hunter Securities

Gold is likely to surpass $2,000 an ounce in early 2013 and average $1,850 for the year, although with periods of volatility, said Global Hunters Securities in an outlook released this morning…the firm looks for the metal to peak at close to $2,300 in 2014, although it also anticipates that the average for that year will fall back to $1,750…

GHS lists several factors supportive for Gold…“Gold prices have anticipated various monetary inflation waves since 2008, and we believe these monetary conditions will persist for quite some time,” the firm said. “Gold prices may also anticipate a future non-monetary inflationary phase in which consumer prices lift much higher than central-bank overnight rates, thus creating another favorable source of price support because of gold’s attractiveness during times of higher inflation”…

Rising Gold prices since 2003 have slowly eroded world gold-jewelry consumption, but central-bank demand has emerged as a source of support, GHS said…“Central banks globally seem to be taking advantage of Gold’s talent as a currency, something more difficult for household-sector jewelry consumers to utilize, in our view, thus reducing our concerns about jewelry demand’s recent weakness”…

GHS said the downside risks to its price forecast come primarily from the equity markets and the strong inverse correlation between global stock prices and the U.S. dollar…

Today’s Markets

Asian markets were mixed overnight with Japan’s Nikkei ending a 7-session winning streak…China’s Shanghai Composite posted a 2-point gain to 2116…European shares are up modestly this morning (European Central Bank President Mario Draghi visited the German parliament, the Bundestag, in Berlin and reiterated his belief that the ECB bond buying program is vital to the euro zone) while North American markets are trying to regain their footing after yesterday’s sharp losses due in large part to earnings disappointments…as of 8:45 am Pacific, the Dow is up 21 points to 13124…the TSX is down slightly while the Venture Exchange, which found support yesterday at its rising 50-day moving average (SMA), is unchanged at 1289…

FMOC Meeting

No action is expected from the FMOC meeting which wraps up later this morning…Federal Reserve Chairman Ben Bernake has stated he’ll stoke the economy until the job market recovers “substantially”…that promise may force him to keep buying bonds until the final months of his term ending in January, 2014, according to economists in a Bloomberg survey…68% of 60 economists said the Fed chairman’s third round of quantitative easing will last until late next year or beyond…just 51% of them said the strategy will help boost employment, with a median estimate of 116,000 jobs over the course of next year…

U.S. Dollar Index Chart Update

The greenback is showing signs of wanting to push higher at the moment, perhaps a bet by some traders that Mitt Romney could pull off a victory in the November 6 Presidential elections…however, the Dollar Index would still face a considerable resistance band between 81 and 81.5…yesterday, importantly, the Dollar Index broke above a down trendline as well as its EMA(20), so the dollar has to be watched closely as a potential catalyst that could knock Gold down below $1,700 to its next level of support…

Germany’s Manufacturing Sector Weakens But China On The Rebound

Germany’s manufacturing sector, the engine of Europe’s economic growth, slumped in October, dragging the entire euro zone further into decline as private sector activity in the 17-country single currency area plunged at the fastest rate since June, 2009…purchasing managers’ indices for Germany showed manufacturing and services activity fell unexpectedly to 48.1 in October from 49.2 in September – significantly below the 50 mark, which indicates a contraction – driven by a sharp drop in the automobile sector and exports to southern Europe…meanwhile, German manufacturing dropped to 45.7 in October from 47.4 the previous month, according to the data from Markit Economics…

China On The Rebound

Similar PMI data for China suggested the world’s second biggest economy, a key world exporter, is slowly recovering from its weakest period of growth in three years, with new orders and output at their highest in months…an initial gauge of Chinese manufacturing activity rose in October compared with a month earlier, offering the latest sign that China’s economic slowdown might be bottoming out…the reading from the preliminary HSBC China Manufacturing Purchasing Managers Index still showed manufacturing activity contracting in the world’s No. 2 economy but the rate was a healthy improvement from the September reading…”October’s flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index, which picked up to a six-month high,” said Qu Hongbin, chief economist for HSBC Holdings PLC’s China arm, in a statement…the numbers are the latest positive sign for the Chinese economy, along with a spate of indicators from money flows to exports to industrial production..still, some economists see sluggish growth continuing into next year…last Thursday, China said growth slowed to 7.4% in the third quarter from a year earlier, compared with 7.6% in the second quarter and rates well above 8% in 2010 and 2011…

Kicking The Can Further Down The Road – Greece Gets Extension

CNBC reports this morning that Greece has been granted its long-standing plea for additional time to push through austerity cuts that have been finalized after months of negotiations…”Today, we obtained the extension,” the country’s finance minister (Yannis Stournaras) told parliament, referring to the additional two years to hit bailout targets that Athens has been lobbying for…he also said the government would tell European counterparts that it is ready to put its latest austerity package to parliament next week after winning additional concessions from foreign lenders…a Greek finance ministry spokesman confirmed to CNBC that the country had been granted a two-year extension but declined to comment on who had granted it…a swift deal on the package is crucial for Greece’s efforts to unlock more aid under its latest bailout, with the country just three weeks away from running out of cash…

Rainbow Resources (RBW, TSX-V) Chart Update

Volume has been picking up in Rainbow Resources (RBW, TSX-V) in recent days, and John’s updated chart shows some encouraging signs given the symmetrical triangle formation as explained below…Rainbow’s strength during a bad overall market day yesterday was certainly impressive…with drill programs at Gold Viking and Nevada set to begin, and results pending by the end of the month/early November from the International where Rainbow indicated it intersected the vein system, the next couple of weeks are going to be very interesting…more on that tomorrow…

GoldQuest Mining (GQC, TSX-V)

The strong support around 80 cents that John has shown in his recent GoldQuest charts has held up well, and GQC is up a penny to 86 cents as of 8:45 am Pacific…below is an another updated chart…

Corvus Gold (KOR, TSX) Chart Update

Corvus Gold (KOR, TSX), one of our favorite Nevada plays, has performed remarkably well recently after announcing a $3.5 million private placement at $1.07…as of 8:45 am Pacific, KOR is off 3 pennies at $1.45…note that KOR is now trading near the top of an upsloping channel…it could still move a little higher over the near-term but traders should be cautious at the moment…

Note: John and Jon both hold share positions in RBW while Jon also holds a share position in GQC.