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June 21st Gold Trend Analysis

In last nights website update resistance in gold was listed at 1545-1552 and the high so far today is 1545.20 in spot gold. Support was listed at 1527-1535 and the low so far 1538.50

TRADES: I’m long from 1526 and 1535.20 from yesterday. Per last nights website update, I had an EXIT at 1544.20 on the 1535.20 long position that was filled this morning. I have placed a rebuy back order at 1535.20 for today.

CME NEWS

London Gold Fix $1,543.00

With the Fitch ratings comments overnight pointing out some concerns toward Italian fiscal policy and indicating that the US would be in restrictive default if the debt ceiling isn’t raised prior to August 2nd, there would seem to be several residual safe haven issues capable of supporting gold prices. With a major US investment banker suggesting that gold prices could sit in a range of $1,500 to $2,000 over the long haul, that might provide the bulls with some resolve, as that upper price potential is greater than most recent mainstream gold price targets. The bank did indicate that gold prices in that $1,500 to $2,000 range would require a continuation of strong long term investment in the yellow metal. With the markets periodically focused on the Greek debt situation and rumblings being lodged toward Italy and the US, there would seem to be several move to quality themes waiting in the wings.

While the trade will be ratcheting up its focus on the stance of the Fed over the coming 24 hours, the Fed statement isn’t due until early afternoon tomorrow and therefore any reaction to that outcome could be premature in the trade today. At least to start today, the gold market is seeing some minor support from the dollar markets. Gold might have seen some support from Australian Agricultural and Resource Economics and Sciences predictions of a slight decline in Australian gold production estimates for the coming year. In the recent past, gold has weakened in the face of soft US numbers and therefore the question is, will the gold trade focus on weak numbers in deflationary stance, or will the gold trade see weak numbers as a development that adds to the overall economic uncertainty in the marketplace? The potential for volatility off Greece is high, as that government will have a key vote within the coming 24 hours. Therefore some gold bulls are probably expecting a dramatic increase in protests in Greece. SYRIA is also escalating — lets not forget the middle east.

While equity markets in Asia and Europe were generally stronger during the overnight session, US equity markets have opened with moderate gains so far.

The US Dollar is slightly weaker against most of the majors this morning, although posting a small gain versus the Pound. The Greek Parliament will have a confidence vote today on the current government, while the EU and IMF are scheduled to arrive in that nation. A survey of German economic sentiment during May was -9.0, weaker than expected. The Feds Open Market Committee will begin a two-day monetary policy meeting this morning.

GOING TO THE CHARTS:

Gold remains in a trading range of 1525-1550 and is testing the dotted downtrend line in the 1545-1550 area. Resistance is the 1545-1547 area of the dotted trend line and the 1551-1553 zone of the Fibonacci 78% retrace area. Both of these areas should provide resistance today going forward. Support is the 1533-1536 area and additional at 1526.

With the FED meeting today and minutes on Wednesday afternoon, it is probable that gold will remain inside the trading range as listed above. There is also a GREEK vote after the market close today that is being watched carefully by traders.

Traders are selling the 1545-1547 area today —- but the potential for gold to move towards the 1551-1555 area is also a consideration. If that area is exceeded there should be a lot of short covering by traders.

In summary — the upside looks capped by either the downtrend line 1545-1547 or the 61% retrace aat 1551-1555. On the downside — it looks like 1533-1536 or 1526-1529 are the key area’s of support.

AS LONG AS GOLD IS CLOSING ABOVE 1519-1526 the momentum of the purple channel will still be in effect. In summary — the overall trend remains in a sideways type fashion — but a close above dotted downtrend line would add to upside potential. As long as we continue closing above 1533 the trend remains higher on the short term. With the FED minutes on Wednesday and employment data on Thursday — the potential for gold to remain in a trading range today is favored. Upside should be limited to the 1547-1553 area and the downside 1533-1536 area. We’ll favor this trading range into Wednesday.

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."