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July 15th Gold Trend Analysis

In last nights update on the website, resistance was listed at 1592-1602 and the high so far today is 1590 —–Support was listed at 1567-1577 and the low so far today is 1576.

TRADES; Long gold at 1466 —- Stop is currently 1431
Long Silver at 35.15—-Stop is 34.06 intraday (Sold 1/2 at 38.75 to lock in profits)

CME NEWS

London Gold Fix $1,592.50

After a sharp low to high move this week of $53 an oz, October gold had a late Thursday pullback from technical balancing and bottomed this morning near 1575 shortly after the London open. Since then it has moved back to the 1590 area.

Some traders were banking profits ahead of the European bank test results later today as some traders were concerned that the total of failed banks might not be as high as was recently feared. It is also possible that gold has slipped overnight because of ideas that some type of US debt deal might start to come together, with cuts of only $1.5 – $2.0 trillion. Seeing a significantly larger deficit reduction package appears to be too difficult to engineer in the current environment and seeing a large reduction in US spending could have been seen as a move that would have made it even more difficult for the US economy to grow.

In the short term, uncertainty off the Euro zone and US conditions remains in place, but the gold trade apparently needs a fresh iteration to rekindle buying interest. Many traders think there could be a wave of speculative buying of gold into the close today for a weekend play.

Gold could have seen some support overnight from talk that Russia’s biggest gold mining company was poised to merge with other mining interests to form the world’s third largest gold mining operation. US economic data today doesn’t look to dramatically change the landscape in gold which recently seems to be expecting anemic to almost insignificant US growth.
While equity markets in Asia were mixed during the overnight session, stock indices in Europe were generally weaker earlier this morning. US equity markets are open with mostly unchanged levels this morning. The US Dollar is slightly weaker against most of the major currencies, although posting small gains versus the Yen and Pound. Foreign direct investment during the first half of this year was up more than 18% above levels during the first half of 2010.

Going to the chart

The two channels on the chart show the intersection where the decision to move higher will be played out. The upper gold line represents the old momentum slope —and a close above it would indicate a continuation of the move next week. Note the highlighted blue area between the purple and gold channel lines. Last nights update suggested price would probably remain in that price area on Friday and wait till next week for further moves. The Shorts have not had any chance to cover any positions this week —– so it is possible that the close will remain firm as they may have to cover some positions into the close. A CLOSE ABOVE the gold trend lines favors higher price next week. The stronger trends are due to kick in next week —– and the potential for a strong move up into months end will be in play towards 1700 if we close above the gold channel line. IN SUMMARY —The trend remains up ———— support is the 1575-1580 area and resistance is the 1592-1607 zone.

by Bill Downey

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