Technical view gold : Comex February gold futures are consolidating quietly to start the week, but the market is technically overbought short-term and vulnerable to a modest corrective pullback. Overall, the recent rally has been impressive and keeps the medium term target at the $1,806.60 level in focus. 

The 9-day relative strength index (RSI), a widely watched momentum indicator, is registering readings above the 70% level, which is the traditional "overbought" level. The market has rallied quickly in recent sessions, and corrective pullbacks are actually healthy for overall bull trends. 

Peter Ruud, technical analyst at Informa Global Markets in New York, pointed to recent action in gold and said "we've gone vertical over the last week. It looks to be neutral right now, but I'm looking for a minor pullback."

Ruud monitors spot gold prices and he noted that the market is currently battling the "half-way" mark between the all-time high set in September and the corrective pullback low in late December. That half-way mark comes in around $1,720, he said. "It's natural we'd have a little struggle near this area." However, looking at the rally seen since the start of the year, Ruud is impressed. "Since we've started the year, pullbacks have been very limited. Pullbacks have been limited to one or two day events before it starts trending higher again," he added.

Near term, however, "it looks like we are due for a correction because we've come so far, so fast," he warned. But, any dips are likely to offer buying spots, according to Ruud. "We should test the $1,800 level once again," he forecast.

"If you see a short-term oversold opportunity below $1,720 that could be a good buying opportunity," he said. He said the next level of support comes in at $1,710. However, he added "I'd be a little suspicious of this trend if it got below $1,660."

Eyeing related currency market action, the U.S. dollar index remains on track for a monthly bearish reversal close. That, however, won't be confirmed until the last trading day of the month, with a weaker monthly settlement. If that were to occur, it would suggest additional weakness in the U.S. dollar ahead, which would be bullish for gold.

Ruud highlighted action in the euro/dollar and noted that from a cyclical perspective, the euro/dollar is due for a rally. "Since October 2008, we've had a pattern of seven months down, ten months up. It was seven months at the end of December," he noted. Overall, he concluded that cycle is "bullish for gold as long as in February the euro doesn't break down below $1.3145 on a monthly basis. The technicals favor the euro and gold over the next four to six weeks."

However, Ruud doesn't expect to see the euro rally for the next ten months. "I don't see that happening. I expect that cycle to break

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