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3rd january Gold Trend Analysis

Last nights website listed resistance at 1583-1593 and the high so far is 1599. Support was listed at 1543-1551 and the low so far today is 1565.

Trades — Looking for a setup

CME NEWS

London Gold Fix $1,590.00 +$15.50

The gold market has shown positive action to start, as the trade is generally hopeful that optimism might be able to remain in place. One also gets the sense that gold prices are also garnering some indirect support from concern that Iran and the US might be set to tangle in the future, as rhetoric between the two players remains incendiary and talking heads and economists have not been shy in their lofty predictions of where oil prices might be headed in the event that Iran actually attempts to block key shipping lanes. At least to start today, there would appear to be a risk on vibe and there is also favorable downside dollar market action to boost the resolve of the Gold bull’s.

Given the initial rise today in February gold to the levels of December 27th, it is also possible that gold is seeing some technically related buying. The 200 day moving average in February gold is seen today up at $1,626.20, but many see initial pivot point action at the even number $1,600 level on the charts. The Commitments of Traders Futures and Options report as of December 27th for Gold showed Non-Commercial traders were net long 135,907 contracts, a decrease of 4,997 contracts. The Commercial traders were net short 169,566 contracts, a decrease of 3,993 contracts. The Non-reportable traders were net long 33,660 contracts, an increase of 1,005 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 169,567 contracts. This represents a decrease of 3,992 contracts in the net long position held by these traders.

Equity markets in Asia were stronger overnight, with European stocks also showing some noted gains to start. The US equity markets is also showing positive action to start the new shortened trading week with the dow up over 200 points. The US Dollar has started lower and is now weaker against most of the major’s going into this morning’s US trading. In addition to favorable Chinese PMI services data overnight, the markets also saw an improvement in German unemployment readings and talk that China might be poised to drift away from a tightening stance in the face of 2012 slowing evidence. Scheduled data flow from the US today will bring forth Construction Spending and an ISM manufacturing report came in at 53.9 – just a bit above estimates. Later in the trade today, the markets WILL BE PRESENTED WITH THE FED’S FOMC MINUTES.

Going to the charts

Last nights website favored higher prices into the Wednesday/Thursday timeframe and the bounce continues. First resistance is going to be the 1630-1642 area this week where the 38% retrace resides from the end of year drop. For today, resistance is now the 1606-1612 area but also it seems the 1600 area is offering some resistance also. Support is now forming at the 1575-1585 area on pullbacks. Our current out look is that once this bounce is over in mid week, a pullback into early next week would look to be a setup for a two week move higher. We also discussed on last nights update the major support levels that had been hit on the weekly charts was one of the two area’s in price where we’re looking for a yearly low and that a 70 to 100 dollar bounce is not unsual when such a major point is touched. The FED releases the FOMC minutes this afternoon and we expect the FED to have nothing but accomodative dialog that will keep the upside alive into mid week. Look for gold to find first support in the 1575-1585 area in spot.

In summary — a pullback to 1587 should be maiximum downside today. Watch for any spikes near the FOMC release at 2::15 PM EST TIME TODAY. FAVOR HIGHER OVERAL — with 1607-1612 being upside resistance.

As a side note, we missed adding a medium term position in GLD last week by 27 cents. If we pullback under 150 this week, I’ll be looking to add a bit to longer term holdings.