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21st december Gold Trend Analysis

Last nights website update listed resistance at 1629-1640 and the high was 1641 spot gold. First support was listed at 1598-1608 and the low is 1605 spot gold.

Trades

Was long gold at 1612 average from last week — Per the website update instructions all long gold positions were sold during this week — one on Monday at 1612, then yesterday at 1622 and this morning the final long at 1638 — for an average of 1624 overall. (all prices basis Feb Contract)

The website listed day trader shorts at 1638-1644 with a stop at 1651 last night as a consideration. If you took the trade —- cover 1/2 now at 1610 for profit — and set your stop at 1638 if you decide to hold the position overnight. If you do, look to take profits in the 1585 area or use a TRAILING STOP ON the position until you get hit.

CME NEWS

London Gold Fix $1,637.50 +$32.50

With the February gold contract overnight rising toward the highs of December 14th and in turn regaining the 200 day moving average, it looked like that technical and fundamental conditions were initially favoring the bulls earlier today— but a selloff from our weekly listed resistance area of 1638-1644 has taken place. We discussed last night on the website that this area would be a good potential for the high of the week.

In addition to positive tail winds from yesterday’s global equity market gains, the gold market was also garnering some residual lift from expected favorable US scheduled data flows on Tuesday and perhaps even from expectations of favorable US scheduled numbers on Wednesday. But as the housing data reported a 4% rise in November, an addendum said they overstated sales by 15% since 2007. (HOW CONVIENIENT) === Like “Darth” said this morning, Now they have removed all the fudge from the past few years, and started all over again with the Nov numbers of a 4% rise –and as he pointed out — build permits continue to fall. The entire reporting structure is questionable – and that’s being nice about it.

Some would suggest that the majority of the upside action this week was due to the European tender, which is seen as a development that initially provided some calm in the EU debt crisis. However, a sudden reversal of market action was seen following the tender data, off ideas that EU peripheral banks were responsible for a large portion of the take down! Not surprisingly, all things EURO remains complicated and volatile and that gives pause to some would-be gold buyers.

In the wake of the setback from the highs in the equity markets and the reversal action in the dollar markets early today, the US existing home sales figure revisions threw another wrench into the data. It goes without saying that action in US equities will be another major leading indicator for gold prices today, as the ebb and flow of equity market action is seen as an indication of optimism or fear from Europe. Some traders are looking closely at the 200 day moving average in February gold, which this morning sits at $1,620.40.

Equity markets in Asia were mostly higher again today BUT China had another down day. Stocks in Europe were also showing some noted strength to start the Wednesday trade but have given up those gains. US markets are open with initial losses but mostly unchanged as of 10:30 AM EST. The US Dollar was weaker against most of the major’s to start the day, but a 70 pip bounce has the index right back at the 80 level.

Going to the Chart

Gold hit the key weekly resistance right at the line on the chart. We’ve pointed out in the website updates that this move was registered as a BOUNCE only and that one final pullback was still favored into late this week or early next week. With this in mind, the final gold long trades were exited in the final 2 hours of the bounce. Last night’s update also suggested that beginning today there was cyclical forces that suggested today could be a long range day and that will continue into the ned of this week. Since the 1641 high, prices took a nose dive to the 1608 area so far. We also discussed that mid-week Wednesday (today) had the potential for the high of the week and this initial pullback also favors that it has transpired.

Resistance for the remainder of the day is 1622-1630 and support is the 1603-1605 area — and then 1580. If our scenario plays out, today is the high of the week and a final short term pullback/correction is underway into the Friday/Monday timeframe. It doesn’t have to be LOWER than last week — but depending on the pattern will depend on whether a long position will be warranted. With Xmas eve only 60 hours away — i’m reluctant to take positions until next week with the exception of quick trades. IN SUMMARY — the bounce we’ve been looking at all week is favored complete. The Buttonwood date of Dec 15th that we discussed last night on the web gave us this upmove — and as we noted the next day of the 21st-23rd is in play. It looks like it may have caught the short term peak. A NEW TREND is due to develop in the time “window” we noted last night — that “window” is in play and if it continues to work, a price low will develop that should lead to a short term move up into the first week of January. We’ll be looking at taking a long trade IF THE PATTERN looks that way. With LOW VOLUMES next week — it will be tricky. The short term trend remains DOWN — and now the bounce looks over. We used the lower red gann line as our guide last night — and as you can see, once that line broke, prices retreated pretty fast to the 1608 area. Remain cautious, defensive, and favor the short term trend is still down. If you shorted 1640 —- take some profit hear — if you only have one position —– either take profit or run a STOP at 1625 basis Feb to protect your gains.

FINALLY — THE 1604-1608 AREA has not been broken where green line support resides — and so, with today being a long range cyclical day — there is nothing say we won’t break that either. IF WE DO— EXPECT lower towards 1585 next. So it looks like the bounce is over, the short term trend is still down, and a break below the green area increases the downside potential. Remain defensive.