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20th january Gold Trend Analysis

In last nights website update, resistance was listed at 1672-1682 and the high so far is 1672. Support was listed at 1650-1655 and the low so far is 1645

Trades

currently long gold from 1650 and 1654 –

currently long silver from 28.63

For the third time this week, the metals rallied to the 1660 area but as soon as London opened, the metals were sold. Gold was sold down to the 1645 area and has meandered in that area all the way into the New York open.

While the gold market was content to waffle around both sides of 1650 for a large portion of the trading session, prices are trying to finish the week on positive note. With most of the news out for the week, any move up today will need to prompt some technical short covering. Certainly gold was undermined by somewhat soft US data on Thursday, but the biggest negative yesterday seemed to come from the surprise of a rating downgrade of Germany.

Greece debt restructuring continues to be negociated but no resolve as of yet. Whatever ends up being agreed to will still basically be a default. Meetings in Athens today centers on the debt swap discussions. Nouriel Roubini pointed out that a new agreement or a change of terms, or non payment is still going to result in a credit event. The deal is still being worked as we arrive at the weekend but there is no final agreement as we approach the Friday close. There will be haircuts, it just comes down to how much and how deep. March 20th is the big day and without agreement there would be a default. It comes down to the swap bonds discussions and both sides have not been able to finalize agreements. The potential that we don’t have a deal over the weekend is also an expectation by many analysts. Roubini went on to note that China is going to have to be involved in a looser monetary policy.

The markets are basically already focusing on next week as its going to be a key week. The first issue of concern for the gold market is the fact that China will be closed for the New Year festivities and that is going to leave this coming Sunday night wide open for the ‘control boyz’ to to tweak the market in a low volume environment. That has been their best tactic when they have initiated raids in the past. Without China in play all next week, demand should at least be in a more weakened state. The second issue is the FOMC Fed meeting next week as markets are going to be on edge as to whether there is additional Quantitive Easing — basically more printing to bailout and keep markets artificially proped up. With the big drop in China’s stock market, the markets are favoring that more liquidity is going to be announced. The other big issue is that OPTIONS EXPIRATION for the metals take place on the 26th. GoldTrends reporter Robert Israel provided data this week that suggests the 1650 area is the spot where the ‘control boyz’ would like to see price end at on expiration day. That level would be where their biggest gains would be realized. However, with the FOUR daily price drops this week below 1650, it is very possible that the ‘control boyz’ have been covering the options and closing them each time gold is below 1650. This gives them the ability to buy back their calls at very low prices since the premium’s are very low whenever price drops below 1645. With gold dipping below that level every day this week, it suggests they might be covering as much as they can. In 2010 and 2011, the metals had their lows of the year during in conjunction with the Chinese New Year event.

The US Stock market fared much better than expected so far today as Google dropped 10% overnight and GE outlook did not look positive and they are preparing for recession in Europe. Only 40% of S&P companies are reporting better than expected earnings, which is lower that previous earnings. Google’s reports that foreign exchange was the biggest detraction — which to me sounds like an excuse. Bottom line was their operating expenses were greater as they hired 30K to their staff. Lower ad revenue was the major issue. That stat keeps the recession worries going as ad revenue is usually an early sign of lower economic activity. General Electrics earnings also suggested the same worry as revenue was lower than expected. Home sales for Dec missed the 5.2% estimate this morning, coming in at 5%. With all of that activity, the US stock market is posting a 60 point gain in the Dow so far. The S&P500 however, is still showing a slight loss. Today is January options expiration and that does have the metal ETFs, GLD and SLV as part of that expiration. Its chart shows price at a major resistance point so its price showdown time next week.

Going to the chart

Last week and this weeks tight 30 dollar range in gold is one of the smallest since July as the cross currents in gold keeps the battle of the bulls and the bears going back and forth. We’ve been using the Gann line as our key support this week and today’s lows were right on that line. Since the New York lows, price has bounced back to the 1660 area as we head into the final hours of trade this week. Support for the remainder of the day is the 1649-1652 area and resistance is the 1663-1672 zone. We discussed on the web last night that Friday could again remain withing the trading range. With the uncertainly in the market and with China closed on Sunday night, I’m going to cover one of my longs here at 1658-1660. I’ll email near the end of the day if I decide to exit the other. In sum, the trend remains up. The one thing to watch is Sunday nights open as China will be closed and that will give the control boyz room to play.