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May 16th Gold Trend Analysis

In last nights website update initial resistance was listed at 1498-1505 and the high so far is 1504. Support was listed at 1476-1483 and the low so far today is 1486.50

Gold so far is trading in a much tighter range than we’ve recently seen. The action so far is sideways ranging from 1486-1504. There has been 4 probes of the 1489 area since the Asian open and all four has brought in support as we entered the New York session. London pushed price up to as high as 1498 and New York has been pushing prices higher since the open.

In the news today is the soverign debt concerns in both Europe and USA. The main discussion from the USA standpoint is the debt ceiling and in Europe is the situation in Greece and other nations struggling with austerity and high interest rates as Greece comes to the table for more money. The debt ceiling in USA is the main focus as it has reached its maximum. For the moment the US is using pension funds and other measures to continue government business as it shifts funds around to meet the 10,000 dollar PER SECOND deficit.

Last week’s action had Funds cut their bets on higher commodity prices by 15 percent in a week after the worst rout in two years, reducing positions in everything from copper to oil on mounting concern that global growth is slowing.

Greece today will plead for a boost in its 110 billion-euro ($155 billion) bailout from European governments and the International Monetary Fund in talks clouded by the arrest of IMF Managing Director Dominique Strauss-Kahn. As International Monetary Fund chief Dominique Strauss-Kahn awaits his first court appearance on sexual charges in New York, the IMF has called on John Lipsky, who it named acting director yesterday, to lead it through its own crisis.

The overflow of the Mississippi River could cause domestic U.S. gasoline prices to rise as refinery operations on the Gulf are disrupted, spurring traders to pick up additional cargoes from international markets, shipping consultancy Poten & Partners said. So far — refineries have not been affected as levee’s are opened up and overflow is being diverted to farmlands.

Chancellor Angela Merkel’s determination to rescue the euro is starting to rattle bondholders, who have driven Germany’s long-term borrowing costs above those of the U.S. for the first time since 2009.

Crude oil is down 1 dollar, Gasoline down 7 cents — and the grains were up in oversea’s trading. The US stock market was off 1/2 % in early trading but has clawed its way back to near unchanged levels.

Going to the Charts:

Today’s 4 hour chart shows that the lower purple uptrend line has held all sell off attempts as price keeps bouncing on the lower trend line. We’ve added the points (blue circles) where the short term stronger trends tend to begin and as you can see they are due to begin this coming week and last into the end of the month. While these points go a great indication of picking turns — not all of them should be expected to work. One example is in January — where price kept going lower into months end.

Resistance for the remainder of the day in gold is the 1505-1509 area and support is the 1489-1493 area.

While gold has pushed up in morning New York trading — the key remains whether the lower purple channel line can continue providing support for gold. The “window” for the stronger trend to begin cound run as late as the 20th so gold is not out of the woods just yet. A CLOSE BELOW THE LOWER PURPLE channel line would add a shor term BEARISH overtone to the trend and would begin to throw caution flags up should gold close below the 1475-1480 area. That is the spot to watch.

On the upside — gold needs to close above the 1515-1520 area in order to increase the potential that the stronger trends are indeed taking effect. In summary — the focus is the US debt ceiling issue and the ECU meetings on Greek debt. If the trends play out — gold should begin for forge a rebound as we go into month end. It takes a close above 1515-1520 to suggest that trend is playing out and the upside gains favor. Until then — watch that lower purple channel line — as it needs to hold it on a closing basis in the 1470-1475 area.

Finally — the US Dollar rallied from 72.75 all the way to the 76 area on the Euro plunge last week. Traders are watching closely as to whether the dollar has finally begun an upmove that might sustain. The key is the 76-77 area to watch on the short term. Price really needs to hurdle above this area to take the dollar more serioiusly.

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."