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27th April Gold Trend Update

In last nights website update initial resistance was listed at 1509-1516 and the high so far is 1510 —-  initial support was listed at 1495-1501 and the low so far is 1503.90

London Gold Fix $1508.00 +$3.00

International gold price action last night range bound and within the price range we listed last night on the website. The markets expect something supportive from the US Fed Chairman later today. However, a component of the gold trade is fearful that the era of low rates might be set to come to an end, even with the Fed company line maintaining a dovish stance. In other words, portions of the gold trade think that a change in Fed policy is on the horizon, even if the Fed indicates the need to keep rates down for a while longer.   Today’s fed meeting will continue on the airwaves until it arrives.  Bernanke has been getting ready by looking at the most likely asked questions that will arise — as well as checking with his central bank counterparts in other nations.

Some gold traders might be somewhat disappointed that Chinese interests backed down from bidding for Equinox against Barrick gold, as some suggest that could indicate that some gold assets are not being bid up aggressively.

Apparently suggestions from the US Treasury Secretary that the US maintains a strong Dollar policy had little positive impact on the Dollar over the last 24 hours, as the Dollar has remained soft. Forex players are hardly interested in the long side of the Greenback into another reiteration of easy money policies by the US Fed later this morning. With the US Fed expected to continue its dovish tune, that is probably lending gold a measure of fresh buying interest early this morning.  GREEK debt rose to 25% this morning but the Euro remains firm.

The question for the bulls is whether gold prices can remain strong after the Fed has had its say today. The bears will even suggest that the majority of the dialogue from the Fed today will be dovish, but that the Fed Chairman won’t be able to conclude his press conference today without threats and in effect attempting to keep inflationary expectations in check.   In other words,  we may talk the talk, but it is questionable whether he will walk the walk.

GOING THE THE GOLD CHARTS:

As expected price remained in a narrow range over the last few sessions.   We’ve added an upper red line to the chart as yesterday’s low has produced some minor support near the 1492-1497 area.  Yesterday’s bounce back to 1509 today was suggestive that gold is still in an uptrend and basically it comes down to how the markets will view the FED speak today.  SUPPORT TODAY IS THE 1495-1501 AREA —- and RESISTANCE AT 1509-1514.

Thus there are two levels to watch — the first being the upper red line from yesterday’s lows.  A pullback to that area that supports would be suggestive that the market should move back up into the end of this week.  Should there be some unanticipated comments — and should the market close below YESTERDAY’s lows — then the potential to go test near last weeks lows in the 1475-1485 area could come in play on Thursday.  The over all trend remains up in gold and for the first time in a while — gold shows a bit more strength than Silver (so far today).

In summary — last nights forecast of a trade range between 1495-1512 remains in place as we head towards the meeting.   Barring unexpected news, the over all trend remains up in gold and we’ll pick it back up tonight on the website.  In the end — regardless of what the FED says — they will remain with a loose policy.

OTHER NEWS:

There was a credit ratings downgrade on  Japan’s sovereign debt, due to the ongoing impact of last month’s Sendai earthquake on their economy. Newspaper reports indicate that Portugal may receive additional time to hit budget deficit targets set by the EU and the IMF for this year and next year. Japanese Retail Sales during March was down 8.5% year-on-year, weaker than expected. UK GDP during the first quarter was up 1.8%, in line with forecasts. Euro zone Industrial Production during February was up 0.9%, in line with projections. The Feds Open Market Committee will announce their decision on US monetary policy at the new time of 10:30 AM EST, with a press conference by the Fed Chairman to follow at the “old” time of 2:15 PM EST. Major US economic numbers released this morning include March Durable Goods up 2.5% (stronger than expected) as demand out of China and Brazil pumped up the number.   The second leg of the Treasury’s monthly refunding, the 5-year note auction, will have results announced at 1:00 PM EST.

by Bill Downey

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