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July 8th Gold Trend Analysis

In last nights website update resistance was listed at 1532-1541 and the high so far is 1545. Support was listed at 1518-1524 and the low so far today is 1524.

TRADES: I was stopped out of my short position and have no short term positions at the moment.

London Gold Fix $1,526.00

The August gold contract entered the pre-US employment report trade this morning in a trading range of 1525-1535 over the last two days. Once the US number hit — and it was a dismal plus 18K — stocks plunged but gold staged a 20 dollar move.

CME NEWS

While the gold market hasn’t seen that much lift off renewed inflationary talk, a portion of the gold trade might be looking beyond the US payroll report today to Chinese inflation readings that are due out over the weekend. The gold market might also be seeing some support from fears of lost gold supply from South African mining strikes but recently the gold trade hasn’t been too keen to factor in supply side developments. In retrospect, the bulls have to be happy with this week’s price action, as gold prices weathered an ECB rate increase and the US data numbers this morning.

Some traders think that gold needs to see improved US economic conditions and a return to inflationary conditions to return to the June highs, while other remain entrenched in a move to quality mode that is banking heavily on the US failing to get a budget deal before the August 2nd deadline.

While equity markets in Asia and Europe were mixed during the overnight session, but US equity markets are down 100 points on the DOW at the moment. The US Dollar is weaker against most of the major currencies as price reversed on the US data news. The German Trade surplus during June was 12.8 billion Euros, higher than expectations. UK PPI during June was up 5.7% year-on-year, higher than forecasts. US unemployment moved to 9.2%

President Obama will speak to the nation at 10:35 EST today —– so there could be some more fireworks later today. In summary — Gold is being favored at the moment as the Euro and US dollar are both under pressure — the dollar from weak economic data and the Euro from the bank plunge in Italy.

Going to the chart

We came into today giving higher prices the advantage per the website update last night and the push higher above 1533-1536 and that dotted trend line keeps the upside in play. We want to see a close above 1533 to suggest higher into Monday. Key resistance is now the lower purple channel line in the 1550-1555 area. Support is now the 1525-1533 area. In summary — as long as gold closes above 1533 today, higher prices into early next week is favored. Key now is to watch and see if gold can hold these gains today in the light of lower crude and stocks and to make sure this was not short covering but indeed fresh buying. Obama comes on to speak in a few moments —- to speak on the US report. From my end — I’ll stay on the sidelines on short term trades and look for a set up next week.

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."