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8th september Gold Trend Analysis

Gold has traded at the 2nd tier resistance we listed on the website (1855-1861) trading as high as 1865 in New York and is currently trading at 1860.

Trades — I have a sell order at 1869 gold ——— stop 1889 intra day

CME NEWS

London Gold Fix $1,827.00 -$17.00

The gold market overnight has managed to add to the bounce in gold prices that was seen yesterday afternoon and has brought gold back to as high as 1865 in New York. With the OECD overnight warning central banks to prepare for more slowing ahead, that seems to have rekindled some macro economic uncertainty again, especially with slowing evidence noted from Japanese machinery orders overnight and a narrowing of the German trade surplus. It is also possible that expectations of a slight change in the forward policy stance of the ECB could be providing gold with some of its buying overnight. The gold market might be somewhat off balance because of the US Presidential address tonight, as that offering is expected to clear up the direction of US fiscal policy somewhat, but if the markets fail to positively embrace that plan, gold prices could be set up for a critical reaction on Friday morning. Into the action today, equity markets in Europe were generally trading in positive ground and the US equity markets are open with slight loss after recovering from down 70 points on the Dow. Therefore, the gold bulls might feel fortunate to have a slightly higher early Thursday morning US tilt. The US scheduled report slate has initial and ongoing claims due out, The trade will also see a US Trade Balance report, which can tend to impact gold prices, especially with estimates calling for a slight narrowing of the US trade deficit. With the gold market seemingly rising into the President’s speech, it would not seem like the trade thinks the President’s plan will be seen as a development that markely lowers macro economic uncertainty.

While the gold market saw evidence of minimal central bank gold sales from Libya overnight, that minor negative was probably countervailed by an upward revision in gold price projections from a major brokerage firm. In the end, some traders were thought to be buying gold off a value hunting angle in the wake of the recent correction.

The US Dollar was slightly stronger against most of the major currencies this morning. President Obama will propose a new jobs plan during a speech in front of a joint session of Congress this evening. An official newspaper has reported that the Chinese Yuan will become “basically convertible” by 2015. Japanese Machinery Orders during July were down 8.2%, weaker than expectations. The German Trade surplus during July was 10.1 billion Euros, lower than market forecasts. The Bank of England left UK monetary policy inchanged as did The European Central Bank. Major US economic numbers to be released this morning will include the July Trade Balance and Weekly Jobless Claims at 7:30 AM. In addition, Feb Chairman Bernanke will give a speech during the session at 1:30 PM.

Going to the Charts

For the second time in as many weeks the market is confronted with a manipulation of price. There was rumor that the Swiss sold a few thousand contracts which took gold down some 60 dollars in under 10 minutes yesterday.

Prices are bouncing back to the maximum retrace of the sell off from yesterday reaching 1865, just a few dollars from the 1869 area. While the market has bounce back very hard here — I remain skeptical and feel that risk is high above 1860. Resistance is the 1865-1875 area and patterns favor the pullback to begin another leg down from this price area. On the chart, the uptrend channel has not been broken yet and the move back up has been strong so there is no sell signal per se at the moment. The only hint so far is that the adaptive average is also at 1869 and so price has not moved back above this average.

In summary — with the global situation in Europe and USA in danger mode, certainly anything is possible. However at the moment I do not favor new highs in gold at this point and feel the risk is too high for short term long positions. I favor a pullback to begin between 1865-1875 at the upper Fib retracement and last into mid month. Keep in mind however that the trend has not yet turned down as the July channel line — so there is speculation in my short term outlook that has not been confirmed by the overall trend.