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25th november Gold Trend Analysis

London Gold Fix $1,676.00 -$10.00

CME NEWS

With Italian government debt auctions this morning posting some fresh Euro era highs, lower equities and weakness in a host of commodity markets, most markets bottomed early this morning and have pushed back up through the New York session.

Fear of slowing in China and a downgrade of a Chinese industrial commodity sector company overnight would seem to leave the fear of a global recession in play. Somewhat surprising is the fact that gold wasn’t able to benefit from news Wednesday of increased central bank buying of gold and it would also appear that even more talk of central bank gold buying overnight was also discounted. Gold is probably seeing some minor pressure from adverse currency market action but it is possible that optimistic anecdotal coverage of the US retail sector sales is providing an offset to the mostly negative Euro zone story line………for today. The US economic report slate today is empty and that probably leaves the focus on the Euro zone story and perhaps that could make the action in European equities even more important into their closes later this morning. With a noted analyst indicating that gold looked to remain off balance and many traders thinking gold is set to track its commodity market fundamentals, the bears had the early upper hand but the bulls have clawed gold back up to unchanged levels. While equity markets in Asia were mixed during overnight trading, stock indices in Europe are generally higher this morning. US equity markets are open with moderate gains. The US Dollar is stronger against most of the major currencies this morning. Chancellor Merkel of Germany stated that Eurobonds would send the completely wrong signal to the markets. Major agencies have downgraded the sovereign debt of Portugal and Hungary to “junk” status. German GDP during the third quarter was up 0.5%, in-line with expectations. German business sentiment was 106.6, higher than projections. Japanese CPI during October was down 0.1% year-on-year, in line with market forecasts. French Consumer Confidence during November was 79, lower than market expectations. There are no major US economic numbers to be released this morning.

Going to the Chart

Gold remains inside a mini trade range of 1670-1710 over the past week. Today’s drop to 1674 is interesting as today is the ideal day (Nov 25th) for a short term trend change in gold (plus or minus 72 hours). The reversal back up in the New York session back to the 1690’s area leaves gold pretty much where we left off on Wednesday. We can see on the chart how immportant this 1670-1680 area is as it is the same price point as the Oct 31st/Nov 1st lows. Gold’s move back up off the lows adds to the potential that price might be ready to move next week towards the 1720-1740 area. We don’t want to put too much into today as the volumes are low. In summary — the 1670-1675 area remains a key point on the chart. Any close below that area would warn that another leg down towards the 1600-1625 area could take place.
On the upside the 1705-1710 area remains resistance that needs to be over come. A close above that area would favor a move to 1720-1740 next week. From a trade standpoint I’m waiting until we reopen next week to do anything. While the Euro debt has taken front stage —- the Middle East and political instability is rising to danger levels again.

Gold reversal back up this morning was a rescue from important support area’s —– but we won’t be out of the woods until we begin closing back above 1700. Resistance for the remainder of the day is the 1698-1705 area and support is the 1683-1687. Next weeks full sessions should set the pace for the next 1 to 2 weeks of direction.

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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."