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May 13 Gold Trend Analysis

In last nights website update initial resistance for Friday was listed at 1511-1515 and the high so far today is 1416.30 — support was listed at 1487-1495 and the low so far today is 1501

CME NEWS

London Gold Fix $1,488.25 -$36.25

Gold was higher overnight off of some weakness in the dollar and some follow-through buying after yesterday’s recovery. The fact that the market managed to turn around and close higher yesterday following a sharp, $49-break over the course of two days lends support to ideas that the anti-inflation, commodity-liquidation move is still on — but the bulls have ideas of their own.

A survey of bullion traders indicate that they have adopted an optimistic tone for next week. Reports of the Bolivian central bank buying a small amount of gold was supportive to the market, as are comments from a Mexican central bank official that they expects precious metals prices to continue to rise. Mexico’s central bank recently bought gold, stating that it was part of a long term investment plan. Traders watching the CPI report this morning saw a 0.4% rise reported by the government — which allows them to say inflation is still tame. (you can judge for yourself when you go get groceries or fill your car with gas.)

While equity markets in Asia were mixed during overnight trading, stock indices in Europe are generally stronger this morning. Early US equity markets open was unchanged. The Dollar is a bit weaker against most of the major currencies during overnight trading, trading near the 75 area. The Bank of Korea surprised the markets by holding steady with their benchmark interest rates. There are indications that Greece has not met the conditions of their emergency debt aid package from the IMF and the EU. German GDP during the first quarter was up 5.2% year-on-year, higher than market expectations. Euro zone GDP during the first quarter was up 2.5% year-on-year, higher than forecasts. Major US economic numbers released this morning include the April Consumer Price Index up 0.4% and US Consumer Sentiment at 10:00 AM EST

Going to the charts:

Let’s look at the long term trend chart today. The gold chart shows that May reached a very important resistance line — the mid channel green. This price peak was 5 years to the week of the 2006 price peak in gold. Each time that gold has reached this line in the past— there has been a medium term correction that takes price to the lower greeen support line. If we were to repeat that outcome — it would suggest price could move to the 1375-1420 area.

In summary — a short term bottom is due near this time frame — and with gold — it looks like a close above 1515-1520 would favor a move towards the 1550 area. A close below the 1470 area would target a potential of 1375-1420.

For TODAY; Resistance remains 1515-1520 and support is the 1498 -1502 area. The current price pattern looks like a range day in the 1500-1515 area. We’ll pick it back up on Monday.

by Bill Downey

FRANCAIS ESPANOL ITALIANO CHINESE

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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."