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June 29th Gold Trend Analysis

In last nights website update resistance was listed at 1507-1513 and the high so far today is 1510.30 (spot Forex) — support was listed at 1490-1497 and the low so far today is 1499.50 (spot Forex)

Trades: Currently short gold at 1525 — stop loss 1547 INTRA DAY

CME NEWS

London Gold Fix $1,506.00 +$3.50

From the overnight action, the gold market and many other markets had moved to factor in a “yes vote” for the latest Greek austerity package……………as there really is no other choice. When interest rates are 28% and you need more money — there is not much one can do but agree to what the lender wants. But passing austerity is one thing —– implementing it is going to be something else. This is not the last we hear of Greece or the last we hear of bailouts coming from euroland. Greece still has to agree on what gets CUT — on the block are thousands of Gov’t jobs, additional vat taxes, property tax increases —- in other words everything to make GROWTH SLOW MORE — which is what the IMF programs usually do. No, we have not seen the end of this. But for now, the debt situation will switch over  to the US debt ceiling debate — as USA PRESIDENT OBAMA will hold a PRESS conference today at 11:30 am est.

Pending Home sales in USA came in at 8.2% in May —- listing it as the biggest rise since April 2010 and potentially the last burst of good sales as this itme of year is usually the peak for sales. Crude Oil inventory comes out at 10:30 est today also.

With strong opinions on how gold would react to the Greek vote, traders had expected some volatile trading but so far things have gone over very quietly. Indeed, so far it looks like commodity markets and the US equity markets have already priced in a yes vote. The tight price range however might be partially due to traders having packed up for the July vacation period already and many players might not want to make new commitments to trade at the moment.

Some of the buying action since the 1490 low on Monday might have been due to minor improvement in macro economic sentiment, as the gold trade into this week’s lows seemed to be fretting over a deflationary type environment ahead and while the economic outlook isn’t exactly robust this morning, there does seem to be less pessimism in the headline coverage, especially with the home sales report.

On the other side, Gold could have been undermined (no pun intended) overnight by news that Russian gold production for the first 5 months of 2011 rose by slightly more than 9% versus 2010, but recently the gold market hasn’t given the supply side of the equation that much credence.

While equity markets in Asia were mixed during the overnight session, Stock indices in Europe are generally higher this morning. US equity markets opened with only modest gains so far today. The US Dollar is weaker against most of the major currencies this morning, although posting a slight gain versus the Yen. Christine Lagarde has been chosen as the new head of the International Monetary Fund. Japanese Industrial Production during May was up 5.7%, roughly in-line with market forecasts. Euro zone Economic Sentiment during June was at 105.1, slightly above market expectations. The final leg of this week’s Treasury refunding, the 7-year Note Auction, will have results announced at 1:00 PM.
As we move to mid week Wednesday and in line with last nights website update, gold moved higher to the minimum range we had listed. Although not visible on this chart, there were THREE attempts in gold to get above the 1511 area but so far that is where traders have been selling the market. There is still over head resistance at the 1516-1519 area should gold continue to move higher. The last three Wednesday’s has provided the highs in this market and with the short term trends still pointing lower — the only bullish factor in gold at the moment is gold usually favors the upside the last two days of the month. So far — the 20 dollar push from the Monday lows has only retraced 23% of the losses from last week. The 38% retrace is 1516 from last week still has potential but a lot will depend on whether gold decides to make mid week Wednesday the peak again. Gold is trying to carve out support as the hourly moving averages are converging right along with price at the 1506 area. Resistance for the remainder of the day is the 1509-1516 area and support is the 1495-1497 area. A BREAK BELOW 1492 would favor the peak is in for the week and that a leg lower into the 1475-1483 area would be on tap. In summary — barring bounces, the overall trend remains down. THE SPOT TO WATCH is this 1506 area — where the retracement line and the moving averages are converging with price. Thus it is possible that gold could forge some upside later today as President Obama speaks to the media shortly on the DEBT ceiling. Thus if there is a gold mover today — it will probably stem from the comments coming out of this meeting.

In summary — the overall trend is down — but with grains and oil moving up — it seems to favor that gold will hold up in today’s session. If we are to get a move towards 1516-1519 — it probably rests on the President’s comments in the upcoming press conferece today. WATCH 1503-1506 as the pivot for the remainder of the day. Should we get a move towards 1519 —- traders will most likely be looking to sell at those levels. It takes a close above 1526-1533 to neutralize the downtrend.

by Bill Downey

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