Gold is rising Monday, as weak shorts cover above $1,300.
After closing on Friday with its second weekly gain in a row, gold was able to begin this week with a bounce, running stops above $1,300 and trading up to the next major resistance with a high of $1,322.90. This high is against the initial April 16 low of $1,323, which is a major retracement level.
With Fed Chairman Ben Bernanke emphasizing again last week that it is too early to make a call on curtailing the Fed's bond purchasing program, investors were able to turn to gold and find value below $1,300. Additionally, as oil costs rise, inflation—which has not been an issue this year—is showing signs of picking up. This sparks an interest in gold as an inflation hedge.
(Read more: Bernanke doesn't understand gold, should we?)
With that said, only a close above $1,323 to $1,326 will help neutralize the metal's bear market. Support will now be seen at $1,297 to $1,300, and if the market does not close above here, the current move higher will be seen as a failure.