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July 7th Gold Trend Analysis

In last nights website update — resistance was listed at 1532-1541 and the high so far is 1534.60 —- support was listed at 1518 -1524 and the low so far is 1523.80

Trades : Currently short at 1 position (2 contracts) 1525 and 1517

Current stop is 1533 stop close only — or 1544 intra day stop.

CME NEWS

London Gold Fix $1,526.25 +$10.45

The gold market did manage a fresh new high for the move overnight and since that action follows a noted range up move in the prior session, it would appear that the upside retains a slight edge. Higher equities and talk that the US might be poised to see some progress on its debt situation has not dampened gold prices so far today.

The gold market might be drawing some minor support from news of increased Russian central bank buying and also from fears that a gold mine strike in Indonesia might be set to extend for another week. However, the gold market recently hasn’t been fully enamored with supply side threats and it is possible that the Russian Central Bank buying story has more staying power than the Indonesian work situation. The gold market also saw brokerage firm price projections for gold raised overnight, but it is clear that a small measure of profit taking is being seen early this morning at the key 1533-1536 resistance area.

The gold market might be seeing some liquidation pressure off news that the US Treasury is exploring ways to avoid a default, as that at least temporarily pushes back the US debt deadline. With the gold market recently tracking uncertainty and move to quality issues, the situation of today’s “Spin” is seen as positive for gold in today’s trade.

With the Euro zone situation appearing to calm slightly and the press picking up on the prospect of some movement on the US debt debate, it is possible that the bears feels like they have a slight edge into the Thursday US trade but clearly they are under pressure and nervous from the large move in gold this week.

While equity markets in Asia were mixed during the overnight session, stock indices in Europe are generally stronger this morning. US equity markets are open with good gains again this morning. The US Dollar is weaker against most of the major currencies, although posting a small gain versus the Yen. The Chinese government will reduce their new investment in seven strategic industries due to concerns with corruption and overcapacity. The European Central Bank announced a rate increase this morning as expected.

Japanese Machinery Orders during May were up 3.0%, in line with forecasts. UK Industrial Production during May was up 0.9%, lower than expectations. The French Trade deficit during May was 7.4 billion Euros, a larger deficit than projections. Major US economic numbers on the ADP jobs report magically created all kinds of jobs — as we arrive at a point in time where nothing is to be believed.

Going to the Chart

We were looking for higher prices into Wednesday on our last website update — but we did not expect the move back up to be as strong as it has been. Seasonal lows are not due until mid July — but this weeks action clearly puts the potential that an early low this year has to be a consideration.

Today’s chart shows ONE key area we’ve been watching for a month now — the 1533 area where the 61% retrace zone resides. A close above 1533-1536 today would favor a move to the 1550-1575 area in gold. So far the pullbacks since yesterday have been holding the 1522-1525 area. It would take a minimum of a close back below the 1519 area for gold to favor reversing lower from this point. Resistance for the remainder of the day is the 1533-1536 area —- and a push above 1536 would most probably push prices toward 1542 rather quickly. Support for the day remains the 1519-1525 area.

In Summary — price made a mid week Wednesday high —- but higher than was our anticipation. Any close above 1533-1536 will put in question the outlook for a mid month low and would begin to favor the short term upside in gold. The dotted downtrend line where price is bumping up against is the spot to watch. We’ll favor consolidation in the 1519-1533 range for the remainder of today and into the London session on Friday.

A close above 1533-1536 will favor higher prices towards 1555-1575

by Bill Downey

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