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May 19th Gold Trend Analysis

In last nights website update initial resistance was listed at 1498-1507 and the high so far today is 1499.90 — initial support was listed at 1487-1493 and the low so far is 1487.

CME NEWS

London Gold Fix $1,488.75 -$3.50 LME

After reaching first resistance listed last night, the gold market action is off on a weaker footing. The gold market was undermined by news of a quarterly increase in gold production from Gold Fields, from the previous year’s 1st quarter tally. However, on a quarter over quarter comparison Gold Fields did see a decline in output and that might counter the year over year outcome. On the other hand, the gold market could have seen some support overnight from World Gold Council suggestions that the Chinese have implemented a very liberal gold import structure, which according to the WGC could facilitate an expansion of Chinese demand for the yellow metal. With China becoming the world’s largest consumer of gold this year, developments inside that country have to be taken seriously. While a Gold Fields official overnight predicted gold prices will be supported by strong jeweler demand from India and China going forward, the gold market in the short term is set to pay a lot of attention to the ebb and flow interest in “commodities”. In other words, renewed inflationary expectations are supportive, but in the face of growth suspicions, the gold market could face a pattern of on again, off again interest. While the gold market hasn’t paid that much attention to supply side developments, some in the trade might view gold production problems in Venezuela as a minor bullish issue this morning. In looking ahead to the action later today, traders should expect a somewhat significant reaction in gold to the US initial claims report.

While equity markets in Asia and Europe were mixed during overnight trading, US equities opened with a slight gain. You know things are pretty bad when excitement over facebook type STOCK IPO like LIKedin is the talk of the day. Expectations for it to open with 100% gains in the 80-90 dollar per share —— for a company with no earnings highlights the hype.

The Dollar is unchanged against most of the major currencies during overnight trading, although posting a gain versus the Yen. THE DOLLAR NEEDS TO BE watched as it keeps holding the 75 area on a short term basis. The market is massively short —-and more covering will take place on a push above 76. The pattern so far on the chart is supportive. So — keep it in mind.

The head of the International Monetary Fund, Dominique Strauss-Kahn, resigned after being arrested in New York. Fed Regional President Bullard suggested that that the Fed’s can afford to pause after the end of their quantitative easing measures in late June. Japanese GDP during the first quarter was down 0.9%, weaker than expected. UK Retail Sales during April were up 1.1%, higher than forecasts. Major US economic numbers to be released this morning include Weekly Jobless Claims at , and the Philadelphia Fed’s survey of business conditions during May, a survey of US Existing Home Sales during April came in down 0.8% month over month….missing estimates. as well as a survey of US Leading Indicators during April — May Philly Fed Factory index showed a BIG MISS also — from 18.55 to 3.9%

Going to the Charts:

Last night we discussed on the website that the 1485-1489 area should be support if the trend is turning higher. We can see on this zoom in why —— this looks like the short term make it or break it area. A CLOSE BELOW the 1477.50 area WOULD KEEP THE DOWNTREND still in play. RESISTANCE is now the 1495-1497 area — support 1483-1487

Traders have a whole bunch of options here —– One could go long with stops below 1477 intra day BUT MORE SO ON A CLOSING BASIS ——–

One could go short here with stops above 1509 on a closing basis. First targets lower would be 1462-1471 (the lows from last week and this week) and 2nd target would be the 1440-1450 area.

FINALLY — the short term trend Downtrend remains intact on a close below 1477.50 —— that’s the closing number to watch.

ON THE UPSIDE — If gold holds this area —- and moves higher to close above 1509-1512 — it would tilt the favor to the upside and suggest a low is in place for the week.

IN SUMMARY — GOLD is about to make its mind up one way or another. Short term trends are due for a turn — BUT PRICE RULES. This market can still go either way. Above 1509-1512 on a close basis tilts to the upside — a close below 1477.50 keeps the downtrend alive.

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."