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9th november Gold Trend Analysis

In last nights website update resistance was listed at 1795-1799 and the high so far today is 1800. Support was listed at 1768-1777 and the low so far is 1777.

Trades — I exited the long from 1724 in gold at 1802 and the long in silver from 32.87 at 35.28 yesterday and i am currently flat — and watching from the sidelines this morning.

London Gold Fix $1,780.00 -14.00

CME NEWS

The markets are very unsettled this morning. With significant declines in equities, soaring US Treasuries and a definitive lack of leadership from the Euro zone, gold is bouncing all over the place — from 1777 to 1800 and anywhere in between. We discussed last night on the website that all EYES would be on the 10 year Italian yield and the soaring Italian yields rise above the critical 7% level overnight would seem to give the current crisis a pedigree that many think could ultimately rival the depths of the sub-prime crisis. Italy will sell some notes tomorrow —- and test the market. The last update we have is 7.28% on the 10 year bond.

In the current environment, overnight news of a possible doubling of Chinese gold consumption was apparently discounted, perhaps because many gold traders and investors have become fearful of a return to a global recession. What they and the rest should be concerned about is a “LIQUIDITY SQUEEZE” not a recession. France is loaded with Italian debt – and if the panic moves to France – it won’t be pretty. That fear has the US dollar up strong this morning, and is only due to the LIQUIDITY that dollars and treasuries present.

News that Chinese October gold production rose by more than 14%, could also be discouraging some buyers this morning. A number of gold traders think that additional QE will be seen from inside and outside of the US and that efforts from the EU to shore up their EFSF fund will ultimately benefit gold prices, but today, gold is apparently caught in the same cross fire as panic to safety has the US dollar up big —- and the DOW off almost 300 points, a whopping 2.6% and the DAX off 150 PTS. Oil is off almost two dollars a barrel. Inventories were off 1.3 Million barrels of oil — as was Gasoline.

In conclusion, the idea that current events will simply lead to run of the mill slowing and recession are apparently in place and it could take actual fears of a full blown financial debacle. While gold is off — it is off only a respectable 13 dollars. IT is holding while the rest — even silver is seeing a lot of pressure. While equity markets in Asia were generally higher during overnight trading, stock indices in Europe and USA were sold hard this morning.

Chinese CPI during October was up 5.5% year-on-year, in line with forecasts. Chinese PPI during October was up 5.0% year-on-year, lower than expectations. Chinese Industrial Output during October was up 13.2% year-on-year, lower than projections. Chinese Retail Sales during October were up 17.2% year-on-year, lower than forecasts. The UK Trade deficit during September was 9.81 billion Pounds, a larger deficit than expectations. The second leg of the Treasury’s refunding, the 10-year note auction, will have results announced at 1:00 PM EST, Major US economic numbers to be released today include September Wholesale Trade at 10:00 AM.

Going to the chart

Today’s chart looks at the pattern from the bottom of the Sept correction at 1532 to yesterday’s peak at 1803. We’ve painted the chart that the bears are looking at. It would seem that IF this move has been counter trend — the peak should not be far off. We present the chart and say IF because — my own view is gold is NOT in a bear market — but I won’t be arrogant enought to say WE CAN’T have another leg down. My view has always been that the only thing that can affect gold —- or illicit a correction is a “liquidity squeeze” event such as in 2008. So far —- the events have transpired the same as then (in my view) and from a price pattern chart view. Even then — the gold bull is far from being over. While today’s chart does not show it — the last 16 hours has price going from 1680 to 1800 back to 1680 and back near 1800. Thus gold is in consolidation today and quite frankly has done better than the other markets.

The chart shows us just how important the 1770-1777 area is. Not only are there trendlines intersecting — at 1775, but it looks like it is a where a minor wave 4 low point is (for eilliot followers)— it looks like 1770-1777 IS THE KEY AREA no matter which way we slice it. AS LONG AS WE HOLD THIS AREA — the potential for one more pop higher is in play that would complete a 5 wave up pattern in a C wave position. (Again for Elliot readers). REGARDLESS of counts and patterns — a close below 1770 would suggest a move to the 1725-1755 area would come in play.

In summary — the “trend” in gold has not given a short term sell signal yet — and it takes a close below 1770 to favor a move lower on the short term. CYCLES suggest a peak is due here in the next 24 to 72 hours and has about a 75% chance of taking place. WITH THE MARKETS in this TYPE OF SITUATION — a scenario for either side can be made. Our best take is a price peak is due this week — and a short term pullback should begin. Whether we have one more push towards 1820-1840 or if the pattern is complete, is best to remain cautious if your trading the long side. The 1775-1805 area is the trading range we are in —-and have been bumping up and down in. With global conditions — we have to be prepared for either side. So the short term trend is still up ———- but at a point where a pullback begins this week is favored. With the 20 dollar swing up and down — one can try day trading it — but for me — i’d just as soon watch from the sidelines on short term trading until we either get a move above 1809 on the upside —–or 1770 on the downside. Anything else is neutral.