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July 27th Gold Trend Analysis

In last nights website update resistance was listed at 1625-1629 and the high so far is 1628.30 in spot Forex. Support was listed at 1607-1613 and the low so far today is 1616.80 spot Forex.

Trades:

Currently long gold from 1583 —— stop loss being raised to 1604 intra day
Currently Long silver from 35.15 — stop loss being raised to 38.80 close only

CME NEWS

London Gold Fix $1,621.00 +$11.00

The gold market continues to claw out higher highs in the face of ongoing debate, gridlock and a general lack of leadership in Washington. Price has reached our First Wednesday objective of 1625-1629 (1628.30 spot Forex) Adding into the upward tilt in gold overnight were suggestions from a US analyst/fund manager that Ireland and Portugal were probably insolvent and the potential those countries would leave the EU was 30%. With a vote on a US debt ceiling plan in the House pushed to Thursday from today, the market is at fever pitch.
In overnight news, the gold market pushed aside concerned that Russian gold production in the January through June 2011 time frame increased by more than 8% over last year. Perhaps that news was offset by mine strike shutdowns in South Africa, or by news that another gold miner was moving to liquidate up to 20% of its gold hedge book. In fact, with several miners in South Africa facing strike shutdowns and the US debt deal vote in the House pushed back, the bulls have to be happy coming into this morning. With certain US CDS instruments hitting new all time highs overnight, the mve to quality condition remains a key issue for the bulls in gold.Agencies are already warning against prioritizing US payments and that simply turns up the tension and concern in the marketplace.

In the current environment, the gold market might not take that much direction from the Durable goods, Midwest manufacturing or from the Fed Beige book data today.
While equity markets in Asia were mixed during the overnight session, stock indices in Europe are generally weaker this morning. US equity markets have opened lower later and are down their obligatory 100-150 dow points. The US Dollar had been weaker against most of the major currencies until 4 am this morning and looking very dangerous on the charts as it nears all time lows. It has turned up since then — CRUDE IS DOWN as US inventories were up this morning. GRAINS area down also — so the ENTIRE market front is under pressure again today with Gold and Silver being the move to quality play. But that doesn’t mean gold and silver can’t come under pressure either.

THE Brazil Bovespa Stock Market is down 15 to 20% this year.

Representatives from ratings agencies will testify in front of the US Congress this morning.

German Import Prices during June were down 0.6%, lower than expectations. Major US economic numbers to be released this morning will include June Durable Goods at 8:30 AM EST which came in an unexpected drop. The Federal Reserve will release their latest Beige Book at 2:00 PM EST. There will also be results of the Treasury’s 5-Year Note auction announced at 1:00 PM EST.

If prices move above 1629, then the potential to rise toward $1,650, as market partici-pants keenly await a U.S. govern-ment deal to raise the debt ceiling has potential. A resolution of this issue, MIGHT push gold prices back toward $1,590 and is certainly a risk to the longs. Market participants are likely to use the decline in gold prices as an opportunity to add longs initially. There also are concerns regarding the European debt crisis, which remains unresolved and could provide additional support to gold prices. The roll of the nearby active August Comex gold contract into forward active contracts should pick up momentum this week AND AS TRADERS and players exit, they will be looking to re-enter 20-30 dollars lower. Open interest in this contract stood at 19.9 million ounces on 22 July so we need to get ready for the roll over.

IN SUMMARY — THERE ARE A LOT OF CROSS CURRENTS THAT CAN KEEP THINGS in flux today. Be Careful

Going to the Chart

We’re at resistance and a pullback from this area as we hit mid week Wednesday would not be out of line. Support for the remainder of the day is the lower dotted trend line 1611-1615 and resistance is 1525-1529. The trend is still up but the 1625-1629 area should be considered serious resistance and one of two potential places for a top this week. It takes a close above 1625 to consider higher on Thursday. In summary, a potential high for the week at this 1625-1629 area and mid week Wednesday is a consideration for a pullback into the Thursday timeframe. With the Debt decision coming its wise to tighten and short term trade stops you may have.

by Bill Downey

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Thoughts
"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."