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17th October Gold Trend Analysis

In last nights website update gold resistance was listed at 1687-1692 and the high so far today is 1694.70 spot gold.

Trades — Long 1 mini December Gold at 1672 —- stop 1646 intra day. Will bring stop up again after today’s session.

Silver — will buy 1 DEC mini silver on a close above 33.02 — otherwise stand aside.

CME NEWS

London Gold Fix $1,689.00 +$13.00

Residual weakness in the Dollar, and hope that the Euro zone debt debacle will avoid full blown contagion status and ideas that a deep recession might be avoided, had seemingly given the gold market renewed investment interest at the start of trading this week. In fact it had given most commodities and equities a nice boost to start the week. However, over the last 4 hours, the US dollar has turned higher and commodities and equities have given up all their gains and in some cases have turned down. With news of a rise in Chinese monthly gold production overnight, and given that Chinese monthly gold production is almost 32 tons a month, some traders might have seen the overnight supply news as a negative. However, the gold market remains focused on the ebb and flow of investment demand for gold and currently there isn’t that much interest in the supply side of the equation.

Given the action in gold prices overnight, it would seem like the gold trade was also embracing the potential for more positive macro economic conditions ahead. In other words, the gold bulls might have been hopeful of positive scheduled data from US Industrial Production and capacity utilization reports and the bull might also be hopeful of more upside action in the US equity markets. NONE of that played out this morning and equity markets in Europe and US equity markets have erased all gains and have turned lower on the day.

Germany and France are expected to announce plans this week to raise the size of the Euro zone rescue fund up to 2 trillion Euros. The German Finance Minister stated that the “haircut” on Greek sovereign debt will need to be higher than the 21% under consideration during the summer. Major US economic numbers released this morning was the NY Fed’s Empire State manufacturing — lower than expectations for the fifth month in a row, and September Industrial Production and Capacity Utilization came in at 77. The bottom line is the debt crisis in Europe and whether they can come up with a fix. They’ve asked until next week to provide a plan. As if one week is going to make a difference? The bottom line is the Euro debt crisis has not been fixed — and until some plan is agreed upon — the situation remains dangerous to global liquidity.

Going to the Charts

Gold broke above the downtrend line from the sept highs but is unable so far to provide a move higher and above the 1687-1692 resistance. Gold did puncture above 1692 but was quickly halted at 1694 and reversed back to unchanged levels in the past 4 hours. The key area to close higher is 1687-1692 if we are to move higher on Tuesday. There is still concern here for gold as the next short term trend is about to move. As long as we are below 1687, that new trend can still be on the downside. If it does turn down, a close below 1650 would be enough to favor lower. There is minor support today at the 1665-1675 area in gold and resistance remains at the 1687-1692 zone. In summary, the trading range remains in place until we break one way or another. Unless we move higher in the next day or so, gold will become vulnerable to the down side. Continue to be cautious on gold until there is a definitive move one way or another. Today’s price failure at 1694 and the move back to 1680 keeps the downside potential OPEN for gold to move lower and keeps things in a “can go either way ” scenario.

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."