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July 20th Gold Trend Analysis

In last nights website update resistance was listed at 1594-1604 and the high so far today is 1593. Support was listed at 574-1581 and the low so far is 1581.

Trades –
GOLD —I sold the long gold from 1566 at 1602 yesterday — and rebought back at 1583 — and I have a go LONG order at 1573. (this would be total 2 contracts) —- Stop is currently NOW 1544 intra day.

Yesterday’s sell at 1602 suggestion was within 1 hour of the drop to lower levels.

Silver — Currently long from 35.15 —- current stop 36.30 close only.

CME NEWS

London Gold Fix $1,584.25 -$17.75

Talk of possible progress on a US debt deal turned in a reversal yesterday in the gold market that seems to have made the action yesterday technically significant to some traders. Some Press outlets overnight have suggested that gold will remain in vogue, even if a US debt deal is secured before the August 2nd deadline. On the other side of the ocean, the Euro zone debt crisis remains in play, and that issue remains very uncertain.

However, the gold market remains under some minor pressure today on the charts and it might prompt some gold longs to stand aside temporarily.

If the US is headed toward a debt deal that could force the gold market to shift its attention to a fresh theme and at the current time, it will have to hope additional QE from the US is capable of carrying the gold market. Overnight press coverage on gold suggests that fundamentals in gold could continue to support prices ahead, as gold is expected to see its supply tighten further off less scrap supply and ongoing growth in Chinese demand. High gold prices hasen’t seemed to dent demand!

While equity markets in Asia and Europe were generally stronger during the overnight session, US equity markets opened unchanged this morning. The US Dollar is weaker against most of the major currencies this morning. Euro zone finance ministers have delayed their meeting in front of this week’s EU summit, in order to have more time to reach a deal with sector involvement with a new Greece bailout. An official stated that China will not invest their FX reserves in global commodities, as that action would push prices higher. German PPI during June was up 5.6% year-on-year, slightly higher than expectations. Major US economic numbers to be released this morning include June Existing Home Sales in USA came out unchanged annually. Inventories continue to rise.

Going to the Chart

We’ve discussed the potential for a pullback this week based on options expiration next week –and how the 1600 strike price premiums would get crushed if gold pulled back and its hard to not think that it’s having its monthly effect as the boys cover their positions.

From a chart perspective — the pullback stopped at the 23% retrace of the July upmove —and more important support lies at the 1559 area —- the 38% retracement. We think that another leg down would lead to that area —- but there is also minor support at the 1565-1575 zone as well. Thus one of those two area’s should provide support if gold can’t climb back above the dotted trend line.

Resistance is 1592-1596 for the remainder of the day — but gold is also fighting to hold the dotted trend line near 1586. Thus pressure remains on the market ——- we need to watch the next few hours ——as there is a potential for the weekly low to be made. If gold can’t hold the dotted trend line today— then we’ll look for a low on Thursday either at the 1555-1560 area —- or the 1567-1573 zone. In summary — things will get TIGHTER as we arrive at weeks end on this debt situation — and spikes on any decision should be expected. In summary — gold remains under short term pressure — watch that dotted trend line —— we want to see gold close above that area if today’s pullback is forming the low for the week. With the debt situation — things can remain dicey — so be cautious.

by Bill Downey

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