Partners

6th september Gold Trend Analysis

In last nights website update, resistance was listed at 1903-1913 and the high so far is 1920. Support was listed at 1869-1883 and the low so far is 1858.

Trades — Long 1 Dec Mini Gold at 1793 —- Stop is 1840 close only.
Long 1 Dec Mini Silver at 40.80 — Stop is 40.80 close only.

London Gold Fix $1,891.00 +$37.00

The gold market ramped up to another new high overnight but that action was rebuffed by Swiss intervention overnight. They came in and set a “peg” of 120 in the Euro vs Swiss. This caused a 900 pip move —- the largest in 30 years. This event put a 63 dollar pullback from gold before it recovered. Since then it has been trading in the 1880-1900 area.

While gold is short term technically overbought, residual macro economic uncertainty toward the US economy and renewed European debt concerns have rekindled safe haven interest in gold regardless of the adverse intervention market action. Some gold traders might even suggest the Swiss Franc was damaged as a move to quality instrument by the SNB peg and that in turn leaves gold as part of a shrinking move to quality contingent. While US equities are expected to open sharply lower this morning and that might add to the uncertainty in the marketplace, it could take its NOTED DIRECTION in the ISM Non Manufacturing reading which just came out at 53 — a bit higher than expected. Since that reading, stocks seem to have at least stabilized and gold has pulled back under 1900 — near 1890.

The gold market could have garnered some support from news that the Russian central bank was planning to increase reserves this week, but the quantity wasn’t that significant. The gold market might also be impacted by a Fed speech around mid session today, as the promise of easing from the Fed might tamp down some macro economic concerns.

Thus there are two basic things the market is watching. The first is the Euro bank jam up and the highest LIBOR rate in a year —- suggesting that BANKS — don’ t trust banks at the moment — and are reluctant to lend in th overnight markets. The Euro mess is far from solved — and if this is 2008 all over again (which seems likely) it would seem the only way there would be any relief is for the Euro to drift much lower from the current price range. The bottom line is that the confidence in the Euro leaders to solve this problem are not there at the moment and the flows continue to gold, swiss, and other instruments.

The second thing markets are watching will be how Obama’s speech on Thursday plays out.

While equity markets in Asia were generally lower during overnight trading, stock indices in Europe are stronger this morning. They turned on the swiss intervention and have held some of those gains. US equity markets opened with substantial losses near 250 dow points. The US Dollar is close to unchanged levels against most of the major currencies this morning, with large gains forged versus the Swiss Franc and Japanese Yen. The Swiss National Bank announced that the Swiss Franc will have a minimum exchange rate of 1.20 Francs to the Euro. The German Finance Minister stated that Greece will get no more emergency debt aid if that nation does not receive a positive outcome from ECB and IMF inspectors. Euro zone Retail Sales during July were up 0.2%, above market forecasts. Euro zone GDP during the second quarter was up 1.6% year-on-year, in line with expectations.

Going to the Charts

Today’s chart is an hourly view showing the August 200 dollar drop and the action in the markets since then. Today’s high at 1920 is one of the two area’s we listed as a potential peak for the week on the website. 1900-1920 and/or 1970-2010 are the two most likely targets to watch. Today’s 1920 satisfies the first zone — but also leaves open the potential for a possible pullback in an ABC fashion — where the A wave was the drop —- the B wave was this move back up —- and the C wave — would be now where a pullback develops. At the moment — I do not favor that outcome, but it doesn’t mean it can’t develop.

Today’s selloff on the Swiss intervention shaved 63 dollars real fast off the price. The lows for the day was right at the hourly lower dotted trend line and just below the 23% retrace number. Since then price has recoverd back towards 1900. The trend remains up and this latest spike low becomes the new line in the sand. I’ll probably look to bring my stop up tonight just under that area.

If your looking to take profits this week — the 1900-1920 —- or the 1970-2010 area is the current area’s to consider. If I knew for sure — I’d say. My strategy is to keep moving my stop up as it becomes bery difficult to pick tops and bottoms during panic moves like this.

In summary — gold is at the upper end of its price ranges, but until the panic subsides in Europe, the potential for gold to continue higher is favored. For now — that 1857 spike low from this morning is the support area to watch. On the upside — a close above 1920 would probably eliminate any ABC pullback potential and favor 1970-2010 for a price peak for the week.

The 1900 —plus or minus 10 dollars seems to be where the majority of the gold trade should take place for the rest of the New York session.