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May 31st Gold Trend Analysis

In our last daily update (Monday) resistance was listed at 1538-1541 and the high so far today is 1540.50 —- support was listed at 1519-1525 and the low so far is 1532.50

SHORT TERM TRADES

I’m currently long silver at 36.95 and long gold from 1512.20 on the website. I have SHORT TERM trade sell orders at 1544 in gold and 38.95 in silver. However — there is still potential for silver to move to the 39.50-39.80 area so that is another consideration in silver. In gold — there is still potential for trades this week up to the 1548-1553 area this week – and that might be another consideration for you. The other way one can play it is to place sell stops at 1515 and 36.95 and let the price continue to run. I’m being a bit cautious as the stronger short term cycles are due to peak in the first week of June.

CME NEWS

London Gold Fix $1,537.00 +$12.00 LME

Another bailout for Greece is somehow viewed as good news for the Euro and it is up this morning. This is the type of markets we have these days.

The gold market managed another new high for the move overnight, with the June gold contract reaching the level of May 4th in the early Tuesday US trade. Apparently a slightly improved outlook for Japanese manufacturing and decent Euro zone economic readings have provided a somewhat positive macro economic backdrop this morning, which might be accentuated by renewed strength in energy prices. With the Dollar also falling to the level of May 6th, the gold market is probably benefiting from the overnight dollar market action.

Global equity markets were generally higher during the overnight and early morning hours, with indications that US equity markets would open with sizable gains this morning due to end of the month window dressing. The US Dollar is generally weaker, although posting a strong gain versus the Yen. News reports indicate that Germany may drop their attempts to have Greece have an early rescheduling of their debt as a condition for any new aid package. A major credit rating company put Japan on a sovereign debt watch for a possible ratings downgrade. Japanese Industrial Production during April was up 1.0%, lower than market forecasts. German Unemployment during May was 7.0%, in-line with expectations. Euro zone Inflation during May was up 2.7% year-on-year, lower than projections. Major US economic numbers this morning will include a survey of US Home Prices were down 3.6% to even lower levels from 2008. A survey of Chicago area Purchasing Managers which showed a huge drop from 67 to 56.6 as the auto industry pummelled that number. It was the biggest drop since Oct 2008. New orders fell from 66 to 53.5. A survey of US Consumer Confidence shows a drop to 60 — a drop from 66. Milwaukee Factory index was also down to 62. US Confidence also dropped this morning.

The Commitments of Traders Futures and Options report as of May 24th for Gold showed Non-Commercial traders were net long 213,515 contracts, an increase of 18,535 contracts. The Commercial traders were net short 259,797 contracts, an increase of 20,177 contracts. The Non-reportable traders were net long 46,282 contracts, an increase of 1,641 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 259,797 contracts in gold. This represents an increase of 20,176 contracts in the net long position held by these traders.

Going to the Charts:

The gold chart shows resistance today at the fan line near 1544 and at the 78% retrace at 1552. Support so far has been the 1533 area where the 61% retrace and fan line intersects. Thus price is in this trading range for the moment. Resistance for the remainder of the day is 1542-1547 and support is the 1525-1531 area.

AS LONG AS PRICES REMAIN ABOVE THE 1525-1530 area — the short term trend is still up. With the shortened week we already have mid week Wednesday upon us by tomorrow — so things are a little harder to read at the moment. Our best take is still that there is still a short term high due this week and a pullback to mid month. The two areas of potential peak this week is the 1542 -1547 area or the 1552-1558 area.

In summary — as long as price is above 1525-1530 the very short term trend is still up — keeping in mind that a peak is due sometime this week. A break above 1547 would be suggestive that the 1553 area will be tested. With Mid Week Wednesday tomorrow — the first peak and pullback attempt of the week could come into play.

by Bill Downey

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