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30th december Gold Trend Analysis

Last nights website update listed 1561-1566 as resistance and the high so far is 1574. Support was listed at 1533-1536 and the low so far today is 1543.

TRADES — looking to start back up on Tuesday

London Gold Fix $1,574.50 +$43.50

The bulls find encouraged today from the prospect of some year-end position-squaring. With the dollar slightly weaker and equities and many other commodities slightly higher, gold’s gains going into this morning are fairly impressive. The market had gotten extremely oversold following its break from December 8 into yesterday’s lows, so it is not surprising to see the market recover as we approach the last trading session of the year.

While gold is expected to finish 2011 with a gain of 10% on the year, it will mark its first quarterly decline in 3 years. There was some interest noted in Shanghai overnight that helped lift prices. The approach of the Lunar New Year in late January could encourage more longs from Asia in the weeks ahead. While there is not much in the way of scheduled economic data today, a strong NY ISM report could provide some support to gold and other commodities, as would any further escalation in Iran’s threats to block the Strait of Hormuz. Equity markets in Asia were generally stronger overnight, with European stocks initially opening close to unchanged levels this morning. The US equity markets is showing neutral action but trading has been subdued going into year’s end. The US Dollar has given back early gains and is now weaker against most of the major currencies going into this morning trading. Japanese manufacturing during December was 50.2, a gain of 1.1 from last month’s number. Chinese manufacturing during December was at 48.7, a slight decrease from the previous number.

Going to the charts

Today’s chart is the longer term weekly chart. Note how yesterday’s price was an exact hit touch of the long term green channel line. This line has rebuffed every pullback since 2008. Thus the end of week bounce here is to be expected after such a touch of an important trend line. The bounce so far, when taken in context is really just that, a bounce. In other words, the overall trends are still down. BUT as we discussed on the website last night, this channel line is one of the two most likely places for a low in this correction AND SHOULD BE TAKEN AS an important point. The other is the lower red line on the chart. WE EXPECT one of these two area’s to provide the “final” low of this correction. But even if this area we hit this week not the low of 2012, a good sized bounce should be expected at this area. The trade returns next week and things should go back to normal. If the correction is coming to an end, a pullback into 9th of January would be perfect to align cycles for 2012. The bounce should continue into next week. The buying will begin to focus on the Chinese Lunar new year which is due the 3rd week of January. This bounce looks higher into mid next week. If we can get a pullback after that, and it doesn’t have to be a NEW LOW, but a pullback, the outlook will become much more bullish. Resistance for the remainder of the day is the 1572-1578 area and support is 1555-1562.

In summary, the “trends” are still down, but price has reached a major support area on the chart that is one of the TWO PLACES to consider it as a major low in price. As we’ve pointed out on the website, this price zone is a MEDIUM TERM ACCUMULATION price point — and an excellent area to add to long term price positions or to begin taking a small position if you new to the market. The US markets are closed on MONDAy — as such, there will be no daily report.