As the Larry Summers news boosts the gold market, December gold futures should be well supported above $1,308.30.
With news that Summers withdrew his name from consideration to replace Ben Bernanke as Fed chairman, gold opened higher Sunday night. This continued the bullish momentum we saw into the electronic close on Friday.
On Sunday, gold traded up more than $25 from its Friday floor close, reaching a high of $1,336. This may look like a monstrous open, since gold closed the floor session on Friday at $1,308.60, but in reality, the electronic session went off just below $1,330, and gold traded less than $10 higher on Sunday night.
While the news about Summers broke on Sunday, gold's quick surge on Friday led some to wonder whether speculation in fact began late Friday. On Friday, the White House responded to a report that a Summers appointment announcement was imminent by saying that Bernanke's replacement had not yet been chosen. Some say that's what led to gold's rally into the electronic close.
After all, Janet Yellen, who is now the likely replacement, is clearly more of a dove, and would be inclined to keep Fed stimulus on the table longer. Since more stimulus means lower bond yields and perhaps a higher chance of inflation, this is seen as bullish for gold.
(Read more: Bernanke staying still possible with Summers out?)
Gold's floor close on Friday was at the major $1,308.30 retracement level, and bulls can look to buy this level on the first time it is tested on Monday, as it will be the first strong support level. A close below here will be bearish, and likely send the market consolidating between $1,296.80 and $1,308.30 heading into Wednesday's big Fed policy announcement. A close below $1,296.80, though, will bring the two major support levels below here into play: $1,278.60 and $1,271.80.