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10th january Gold Trend Analysis

Last nights web listed gold resistance at 1619-1626 and 1630-1634. The high so far is 1640. Support was listed at 1597-1608 and the low so far is 1607

Trades

— long silver at 28.63 —- New stop is 28.64 intra day
— long feb gold at 1615 — new stop is 1615.50 Intra Day

Gold is making something more than a modestly higher initial bid to start the Tuesday US trade. In fact, with February gold posting gains in excess of $25 an oz to start and US equities showing noted gains, one gets the sense that gold prices are being lifted by a return to a “risk-on” condition, or in other words, gold might be lifted today due to positive macro economic views.

More than likely, gold is also drawing some support from favorable dollar market action. Others suggest that gold is drafting some lift off moderately higher energy price action, which might be due to statements made by Iranian and Venezuelan leaders overnight, or the gains in energies might simply be a reaction to international economic optimism.

Gold could have been held back by news of high gold production from a Canadian gold miner overnight, but supply side stories are probably destined to be discounted in the action today. In fact, the gold market also looks to discount overnight reduced gold price forecasts, which were released by a bank analyst. Perhaps gold was drafting some support off news that India might be poised to allow more banks to import both gold and silver.

In the wake of initial bullish action, gold might need to see a favorable US auction and perhaps mostly favorable corporate news flow just to extend the early upside breakout to the highest levels since December 21st.

Equity markets in Asia were stronger overnight and that action generally seemed to extend around the globe. The US Dollar has started out weaker against the euro, but it was showing some minor gains versus the Aussie Dollar. Overnight the markets saw the Chinese trade surplus expand, but many also think that the Chinese trade numbers will usher in further assistance from the PBOC. In the US trade action, the markets will see weekly chain store sales readings and US Wholesale trade data and therefore the scheduled data front isn’t expected to be that important to the metals trade today. There will be three Fed speeches around mid session today and that dialogue could impact the metals if there is more noted dovish talk from the Fed. In addition to the Fed speeches there will also be a 3 year US note auction and periodic impacts are to be expected from the start of the US corporate earnings cycle.

Going to the Chart

Gold moved higher on Tuesday. A quick look at the chart shows that gold was not willing to let 1600 become resistance and instead kept making the lows in our 1597-1608 support area. After gold held 1607 last night for the 3rd day in a row, I sent out last nights EMAIL alert that I’d try a position at 1615. So far the 1640 area resistance can be observed on the chart as price hit the upper red Gann Line. Since then, gold is trading in the 1633-1640 area. Recall last night that 1633 is an important closing price point for us as it would give us a CLOSE above last weeks high.

The other area to address is the cycle portion. We’ve been waiting for this time line of Jan 9th (plus or minus 72 hours) to provide either a high or low and then the next 1 to 2 week trend to take place. The initial plan is to take a position and try to ride the next two weeks. A few readers were asking why the long position as it did not seem to be following plan. Part of it is that the pullback had been trying to break 1600 for the last four days. In other words, the pullback was trying to develop but was too strong to get lower. With the big China Stock rally yesterday and with the BOE and ECB announcing rate policy on Thursday, it seemed to be that there were just too much power to allow gold to be below 1600 so we “GAVE” into the market trend.

However, with gold reaching its highest point today, it still leaves open the POTENTIAL THAT gold is making a HIGH here and that this is just the final spurt before the next two week downtrend. If price can’t hold this area and turns back down from 1640 and is unable to close above 1625-1633, then gold can very well turn down and at which time, I’ll get out of the long and look to short the trade. The “window” for the short term trend closes at the end of trading on Dec 12th. These next 60 hours is where the trend should be set and where it is MOST LIKELY TO REVERSE down if the next two weeks is indeed a lower trend. So while the plan has been to buy a dip if price pulled back into this week or sell a rally into this time frame, last nights purchase was in part because the PULLBACK from last Thursday kept HOLDING the 1597-1607 area. In other words, it kept trying to pullback but was being supported at 1600.

Going forward, if GOLD cannot close above 1633 it still leaves the potential that we’re going to see a peak in the next two days and then begin a 2 week downtrend. Once the “window” closes after the Thursday close, then direction should be in place for the next two weeks. If we peak, I’ll look to reverse along with the market and try to follow it. And that is the key — while i have an outlook and plan — i’m ready to follow PRICE where it wants to take me.

One can make a case here to short this area as the bounce from 1520 is completing a 3 wave move back up. Thus for those who did go long last night, getting rid of 1/2 here is not a bad idea. I would be doing that if i had more than one contract. And if your bearish — 1640-1644 or 1663-1667 are two considerations.

Resistance remains the 1638-1644 area for today and support is the 1625 zone. Additional support is 1612-1616. In summary, gold could very well make a mid week Wednesday peak tomorrow as our high for the week and then begin a pullback for two weeks. However, as we laid out on the website — if the low came in early due to the short week during Xmas and New Year — then the upside move could become very strong. The next 60 hours hopefully will provide us some clue as to what to expect. For the remainder of the day that 1640 area or upper Gann line is resistance and 1625 is support. A close above 1633 keeps upside potential alive. The high for this week favors 1640-1644 or the 1655-1663 area as the most likely. We’ll pick it back up on the web tonight. The remainder of the day looks range bound in the 1625-1640 area.

FRANCAIS ESPANOL ITALIANO CHINESE

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Thoughts
"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."