Gold tops $1,700 an ounce, hits 6-week high

Gold is back above $1,700 an ounce after losing luster from nominal record highs set late last summer. Now the technical picture favors gold bugs in the short term too, according to new research.

The Federal Reserve's pledge Wednesday to keep short-term interest rates at near zero until 2014 is depressing the dollar and boosting the precious metal, thanks to its traditional role as a hedge against inflation.

That helped gold futures traded on the Comex division of the New York Mercantile Exchange add more than 1 percent Wednesday and rally to a six-week high on Thursday, closing up 1.6 percent at $1,726.70 an ounce.

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After hitting a non-inflation adjusted record high of more than $1,900 an ounce back in August, gold lost much of its shine. The yellow metal languished in the $1,600-range for the better part of a month after recovering from a low of about $1,550 late last year.

But now gold has spiked past $1,700, and done so in a technically bullish fashion, notes Bespoke Investment Group.

Gold broke above its 50-day moving average Wednesday, a technical barrier that means the downtrend in place since mid-August has been broken, Bespoke says. See the chart, courtesy of Bespoke Investment Group, below:

Wednesday and Thursday marked the first time gold notched back-to-back gains of at least 1 percent since early November, notes Bespoke.

Plenty of investors have a healthy skepticism of gold. Warren Buffett, for one, hates the yellow metal, since it offers no yield nor earnings. And long-term investors would be wise to have no more than a partial allocation to commodities, including gold, in a highly diversified portfolio.

That being said, the most recent trading action does make gold's short-term prospects look much improved over the past few months.