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2nd May Gold Trend Analysis

Last nights website update listed resistance at 1577-1587 and the high so far is 1577.   Support was listed at 1546-1554 and the low so far is 1539.60.  Current price is right around the 1554 area.

The gold market initially opened higher last night and forged a new all time high at 1577 before a rather wide range of $37 overnight. The gold market managed the wild action in the face of a modest bounce in the Dollar. Apparently gold is initially discouraged by the decline in global geopolitical risk that has settled in after the US announced that Osama bin Laden had been killed in Pakistan over the weekend.  But it could act to inflame tensions –and that will provide gold with a reason to move back up today also.

It is also possible that gold is under some pressure from news that member of the Gaddafi family was also killed over the weekend, as that news undermined oil prices and might suggest to some that the resistance against the rebels in Libya might be set to crumble. The rather significant washout in silver prices overnight is also contributing some pressure to gold prices today. While the Dollar is slightly higher, the market action overnight wasn’t overly significant and therefore the action in gold this morning doesn’t look to be feeding directly off that particular outside market force.

London is closed today, so the early US gold action might be seeing a narrower range than might have been the case in the light of the surprise overnight news flow. There was a positive Indian gold import projection floated overnight but that doesn’t seem to have benefited gold prices, perhaps because the gold trade was already expecting favorable gold import prospects for India.

Going to the Charts:

Our weekend report on the website discussed that the short term strong trend was due to peak this coming week and a 1-2 week pullback in gold is coming due. The large range lower in price certainly suggests that this may be the case, but the “window” for a peak ideally lasts until May 6th.  So a hard bounce back could certainly develop.  The failure of the US Dollar to move on all this news — should give gold a boost back up to the 1565-1569 area.

The sell off in gold so far today is a 38% pullback from the lows established last week. The chart shows the 1543 area as that level and we can see that gold only traded below that level for 10 minutes and thus that price area is still valid support.   THUS THIS PULLBACK LEVEL is actually a NORMAL retracement level to be expected after such a move higher from last week.

In summary we’ll look for gold to rebound back to resistance for the remainder of the day in the 1565-1569 area.  Support is the 1534-1544 area going into Tuesday should another leg down come into play.  Lets see what the rebound looks like in gold when it reaches the 1565-1569 area

by Bill Downey

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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."