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5th May Gold Trend Analysis

In last nights website update resistance was listed at 1524-1530 and the high so far is 1522. Support was listed at 1501-1507 and the low so far is 1496.

London Gold Fix $1514.00 -22.00

Apparently gold wasn’t as inspired as the US Treasury market by comments from the Fed’s Lockhart last night who made mention of QE3. While the gold market hasn’t paid that much attention to supply side news lately, gold prices could have seen some pressure off news of an increase in gold production from Randgold in its 1st quarter. However, that potentially undermining news might have been countervailed by news that Harmony gold production declined in their 2nd quarter. It does seem as if the recent slide in precious metals prices was prompting a pick up in Indian retail demand, as ultra high prices at the end of last month reportedly discouraged some of those buyers. While the markets don’t expect rate tightening from the ECB or the BOE, dialogue from that front could add to the bear’s resolve. In conclusion, supply and demand news overnight for gold could have supported prices to higher levels this morning, but apparently the broad based commodity liquidation wave mentality still lurks in the marketplace.

US jobless claims were way up this morning (474K) as the market comes to the realization that the US economy is still in trouble.

While equity markets in Asia and Europe were mixed during overnight trading, early indications are for US equity markets to open today’s session lower. The Dollar is much stronger against most of the major currencies during overnight trading. The Bank of England and ECB both kept rates the same.

The bounce in gold from yesterday’s 1506 low ended at 1522 and before the London open. From there prices drifted lower into the New York session. The market has recovered about 10 dollars since the unemployment number but remains under pressure.

Going to the charts

Today’s chart shows uses the daily and has our short term overlayed on it. The red circles are when the market is most likely to be at its weakest and the blue circles when it is most likely to be at its strongest. It is not exact but does provide good guidance. The current weak cycle is not due to end until the May 17th timeframe (plus or minus 72 hours). Bounces aside then, the weaker trend is still in effect.

Resistance for the remainder of the day is the 1515-1522 area and support is the 1487-1495 area. In summary, the commodities sell off is still under way. With more US data due on Friday — weakness will not be friendly to commodities the short term trends remain down. On a weekly basis — the lower purple line at 1475 is the weekly support area.

by Bill Downey

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