Partners

27th October Gold Trend Analysis

In last nights update resistance was listed at 1726-1736 and the high so far today is 1729. Support was listed at 1695-1704 and the low so far today is 1704. (all prices spot gold)

Trades — I have a buy order at 1683 spot gold.

CME NEWS

London Gold Fix $1,708.00 -6.00

The gold market pullback so far today got down to the 1706 area. Instead of seeing a wholesale liquidation, off diminished move to quality conditions, the gold market is handling the change of sentiment fairly well. Some traders think gold might be poised to benefit in the event that a more positive macro-economic view manages to settle into position and that would be pretty impressive.

News of potentially increased Russian gold production is probably of little consequence to the trade today, as the focus of the gold market is probably going to remain on the ebb and flow of investment demand. However, with evidence of a rise in gold production at a South African gold mining operation also seen in the news flow overnight, it is possible that some in the trade will come away with a negative supply side view toward prices. In fact, given a long trend of declining South African gold production, it is possible that trade interest in the output of other gold miners in that region might be kicked up a bit.

The gold market does have the benefit of a weaker Greenback this morning and it is possible that gold could attempt to garner some support from the strength being seen in other industrial commodity markets this morning. Gold has managed to benefit from commodity market fundamental developments early today as that action is flowing with a favorable reaction to positive scheduled US data flows.

Equity markets in Asia and Europe were sharply higher during overnight trading, and US equity markets have substantial gains today. The US Dollar is lower and down HARD against most of the major currencies this morning. Euro zone leaders have agreed with bondholders to take a 50% haircut on Greece sovereign debt, and to expend the size of the Euro zone debt rescue fund through leverage up to 1 trillion Euros. The Bank of Japan signaled an easing of Japanese monetary policy by increasing their asset program by an additional 5 trillion Yen. Japanese Retail Sales during September were down 1.2% year-on-year, weaker than market forecasts. Euro zone economic sentiment during October was at 94.8, which was above initial forecasts. The last leg of the Treasury’s refunding, the 7-Year Note auction, will have results announced at 1:00 PM. Major US economic numbers released this morning were Weekly Jobless Claims and third quarter Gross Domestic Product at 2.5% – right in line with expectations. Home sales month over month were down 4.6% — larger than expected.

Going to the Chart

The close above 1650 from last Monday continues to expand prices and gold has reached weekly resistance area’s near this 1730 area. The pullbacks this week have all been small and the new short term uptrend in gold is still in play. The Thursday pullback was about 19 dollars at its lows of 1706 — and has since returned to the upper 1720’s. With the FOMC meeting early next week on Nov 1-2nd and another G20 meeting next week is suggestive that the gold market could be seeing its highs here for the next 3 to 5 days. The 1730 -1735 area is the most likely place for gold to make its highs this week and having arrived there this morning, should provide resistance for the remainder of today. Support is the 1702-1708 area and resistance is the 1730-1735 area. The chart shows this area as upper level resistance. So far the market has regained 50% of what it lost in September and for gold to encounter resistance here is typical. In summary, the short term trend remains up but at these lofty levels, the potential for a few days of consolidation and a slight pullback into early next week would not be surprising. Overall, however, the short term trend remains up.