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July 21st Gold Trend Analysis

In last nights website update resistance was listed at 1605-1612 and the high so far today is 1604 — support was listed at 1586-1590 and the low so far is 1592.50

CME NEWS

London Gold Fix $1,600.50 +$15.25

The gold market remains within striking distance of its highs even though there appeared to be a fresh deal for Greece struck overnight that in turn might have served to tamp down moves to quality sentiment somewhat. Some traders might see the talk of a minor extension of the US debt ceiling, as a sign that the US remains divided on its debt front talks, while others might see that as a development that reduces the potential of a technical default. Perhaps the gold trade discounted the talk of an extension of support for Greece, because of statements from EU leadership suggesting that there continues to be the potential of a selective default of Greek debt.

It is also possible that gold is starting to garner support from talk of a favorable demand for gold in India ahead. However, the gold market also saw some increased quarterly production news from Russian and Australian gold miners overnight and while some might consider that news bearish, the gold market recently hasn’t been in a position to fully embrace supply side news events. Gold does seem to be garnering some residual support from an ongoing pattern of favorable Asian gold demand expectations, which have seemingly been even more prominent in the platinum and copper markets. It will be interesting to see if gold prices react to scheduled US data later today, as the market recently has been dominated by debt deals and not by the ebb and flow of scheduled data.

While equity markets in Asia were mixed during the overnight session, US equity markets open with huge gains this morning. EU leaders are having a summit meeting today to discuss potential solutions for Greece’s sovereign debt crisis. Euro zone manufacturing during July was 50.4, lower than expectations. German manufacturing during July was 52.1, lower than forecasts. Japanese Trade Balance during June was up 70.7 billion Yen, higher than expectations. UK Retail Sales during June were up 0.7%. Major US economic numbers to be released this morning include Weekly Jobless Claims at 7:30 AM, and the Philly Fed business survey for July as well as US Leading Indicators during June at 10:00 AM. Fed Chairman Bernanke will testify in front of the Senate Banking Committee at 10:00 AM, and Fed Regional President Evans will give a speech during the session.

Going to the chart

Our outlook from the web last night to trade on both sides of 1600 as the most likely scenario for Thursday is playing out pretty well. As you can see from the chart — the short term trend is still up. In this funny world — where announcements of a Greek default have stocks up 150 points —-and the Euro up over 100 pips — i guess we should be prepared for anything. Gold is trying to hold the 1590 -1593 area today — and as long as we can close above the middle trend line — the strength will still be with gold. We can’t rule out on more dip to the lower dotted trend line and the 1559-1573 area yet — but it does seem that the market is just clearing out the 1600 option calls that expire next week- —- where there are over 2.3 million oz’s up for grabs. As soon as the boyz have cleared enough — we are favoring one more push higher into the end of the month.

It really comes down to the 1607-1622 area we discussed as this weeks upper range. The bears (and option boys) are holding 1600 at the moment ———and the bulls 1580-1590. OVERALL — THE MARKET still remains strong —-and I still favor the upside into month end. It could be we remain in the trading range just above and below 1600 for another day or two before the break

by Bill Downey

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