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June 1st Gold Trend Analysis

In last night’s website update resistance was listed at 1536-1541 and the high so far today is 1538.50 —support was listed at 1519-1525 and the low so far is 1529.50

TRADES — the website has the latest stops and profit taking levels updated on the daily and silver buttons.

CME NEWS

London Gold Fix $1,532.25 -$4.75

The gold market is showing some weakness in the early US trade, despite action in the dollar that could have lent some support to gold prices. With energy and metals prices in general showing early weakness today, the inflation vibe appears to be largely missing and with a bad ADP jobs figures today coming in at 38K — way down and below expectations, the fear of slowing is maintaining the upper hand over the expectation of inflation. The gold market is at least partially undermined by weakness in Indian gold prices overnight, but the market could have been supported by news from the IMF overnight that both Russia and Mexico added to their official gold reserves last month. It is possible that reduced concerns for the Greek debt crisis was prompting some long liquidation of gold this morning and that action makes the WEAK US economic data even more critical. Some players think the no-vote on extending the US debt ceiling is also cause for some pressure in gold, but that was largely anticipated by the trade.

While equity markets in Asia were mixed during the overnight session, stock indices in Europe are generally weaker this morning. The US Dollar is slightly weaker, although posting a gain versus the Pound. Japanese Prime Minister Kan could face a no-confidence vote in Parliament by the end of this week. EU and IMF inspectors are scheduled to finish a review of Greece’s fiscal progress in the next few days. The official Chinese Purchasing Managers index fell to 52.0, less than expected and at a 9-month low. A survey of German Manufacturing was at 57.7, less than forecasts. A survey of UK Manufacturing was at 52.1, less than expectations. Major US economic numbers this morning included April Construction Spending up 0.4% and ISM Manufacturing down from 60.4 to 53.5 — a significant slowdown,  lowest in a year. Japan economy and oil prices are being blamed,  but the trend in global economic activity continues to retract.

Going to the Charts:

Gold continues to struggle at the 1540 area but has maintained support in the 1526-1533 area near the 61% retrace level.  Today holds the capability of very wide swings in the market — but so far we’ve seen the opposite as the range in gold has been somewhat tight…..but the day is not over yet.

From a cyclical standpoint — a short term trend change is due this week that could usher in pullbacks to mid month so we need to be on watch.  Price has to break 1519-1526 first — otherwise the trend is still up.

While price remains inside the purple channel lines, should price close below 1519-1525 it would be suggestive that the shorter trends could be taking effect.   While the under par economic data being released could be viewed negatively to metals — it also could spark a call to NOT END THE QE money printing that is going on globally and could produce the opposite effect in metals as the view will be NO END TO STIMULUS.   THE STOCK market at the moment has turned down on all the data and remains short term bearish.

In summary —  keep an eye on the stock market — if gold goes its own way higher —the potential to move towards the 1545-1555 area will still be alive.   RESISTANCE for the remainder of the day is 1545-1555 and support is the 1526-1533 area.

by Bill Downey

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