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June 6th Gold Trend Analysis

In last nights website update resistance was listed at 1547-1556 and the high so far today is 1549.40 —–support was listed at 1526-1533 and the low so far is 1540.

TRADES: I’ve shorted gold at 1551.90 with a stop at 1557.50 intra day.

Reuters) – Gold is up so far in early Monday trading, taking advantage of a weaker dollar after weak employment data drove the U.S. dollar to one-month lows and clouded the outlook for economic growth. U.S. employers hired the fewest number of workers in eight months in May and the unemployment rate rose to 9.1 percent, stoking worries economic growth may be faltering and supporting sentiment in gold, which is seen as a safe-haven investment during times of economic uncertainty.

Uncertainty over the future of Yemen while President Ali Abdullah Saleh was recovering from injuries sustained in a raid on his palace on Friday unnerved markets.
“When you’ve got geopolitical factors, what’s going on in Yemen and elsewhere and still very high energy prices, you don’t want to be short of gold,” said Credit Agricole analyst Robin Bhar. “If anything, you want to put more money into gold as a safe-haven store of value, because we don’t know what is coming around the corner in terms of growth.”

Greece’s campaign to secure another bailout to avoid default added to investor worries. International lenders on Friday said Athens was likely to get a fresh multi-billion euro lifeline next month, but there remained enough uncertainty to whet investor appetite for a safe haven.

DEMAND PICKS UP

Reflecting the improvement in demand for gold in what is traditionally a period of slower consumption was the largest increase in speculative holdings of gold futures in 13 months last week, according to data from the U.S. Commodity Futures Trading Commission (CFTC). The net non-commercial position in gold, often used as a proxy for speculative activity, staged its largest weekly rise since April 2010. Meanwhile, global holdings of gold as tracked by Reuters showed a second net weekly inflow, up 239,400 ounces to 64.597 million ounces.

NS Futures – While the gold market could be tripped up by too much evidence of slowing in the US, the gold market initially has generally benefited from the recent revelations of slowing from the US. Clearly a weaker US Dollar has also provided the gold market with some lift, but comments from the former US Fed Chairman Greenspan late last week, might be lending support to gold and other safe haven instruments, as the past Fed head suggested he would agree to a roll back of the Bush tax cuts, in exchange for a shart reduction in spending, as he thinks the failure to cut spending could be a very big problem for the US.

Resistance for the remainder of the day is the 1553-1557 area —– and hen 1568. SUPPORT is the 1533-1538 area.

Going to the Charts

The market is in a secondary upswing, but trade is the 1553-1557 resistance area. A close over 1557 is needed to spark rallies to a breakout attempt towards 1568-1577. A struggle to push over 1553-1557 will be the key. A FAILURE AT THIS LEVEL WOULD suggest setbacks to congestion around 1525-1533. Thus the potential for a double top near 1555 needs to be watched carefully. If we get a close above 1557, then the push to 1568-1577 will be in play going to mid week with the potential for higher towards 1592. As we discussed on the website — those two spikes lower on the chart last week to the red channel line that WERE reversed back up higher was suggestive of bullish action. Thus the weaker trends due to begin so far have been contained and PRICE has to CLOSE below 1519-1536 before we can say the weaker trends are in play. Since I began the update, price has rallied to the 1553 area and is right at the 78% retrace level on the chart. A CLOSE above 1557 woould continue the uptrend. WATCH THE 1553-1557 area —- that is the price turn point. UNTIL PRICE closes below the RED LINE on the chart — the uptrend is still intact. If price is going to turn lower — this area is the most likely place. Otherwise another push into Wednesday will come into play.

Bearish traders are selling here at 1552 with stops at 1557.50 ———- bullish traders are buying the 1533-1540 area with stops at 1516.

In summary —- as long as price is above 1526-1533 —- the short term trend is still up. Watch 1553-1557 — that’s the key area if there is to be a turn lower today.

by Bill Downey

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