4th May Gold Trend Analysis

In last nights website update, initial resistance was listed at 1538-1545 and the high so far today is 1543.20 —– initial support was listed at 1519-1525 and the low so far is 1530.

London Gold Fix $1536.00 +5.00

CME News

The gold market clearly suffered some of its losses yesterday because of the extreme weakness in the silver market. While the Dollar has shown signs of consolidating recently, it remains near a fresh downside breakout on its chart and therefore action in the dollar markets doesn’t look to be the culprit behind the apparent change in sentiment toward gold from the Monday highs. “Darth” pointed out this morning that the 100 pip rise in the EURO this morning is hinting that the MARKET believes that the ECB might increase rates again on Thursday when they meet. If that perception plays out — it should put a lot of pressure on the US dollar. Some traders suggest that seeing two of the most populous countries moving into a definitive rate tightening posture, has gone a long way in tempering global inflation pressures and that might be part of the reason for the noted weakness in gold prices this week.

Reports that George Soro’s sold his silver and gold positions are making media headlines this morning — and may have assisted the downdraft in metals this week.

The market was at least partially deflated this week as due to a minor downshift in geopolitical psychology in the wake of the news out of Pakistan, but it would almost seem as if a number of gold longs simply used the terrorism development as a reason to bank long profits. With the sharp downside action in the silver market, the profit taking mentality appears to be lingering in the marketplace. However — after an almost 300 dollar move this year —- and price hitting some important resistance lines in both gold and silver — and with the weaker cycles in play this week — the pullback is understandable. Gold is actually holding up rather well in the face of the 14% selloff in silver prices.

With US employment news expected to flow in each of the next three trading sessions, there will be no shortage of news to potentially drive gold prices sharply one way or another. It is also possible that renewed Euro zone concerns toward Portugal have provided the market with some minor support.

While equity markets in Asia and Europe were mixed during overnight trading, US equity markets opened unchanged but tanked lower on the ISM data — lower than expected. The Dollar is weaker against most of the major currencies during overnight trading, although posting a small gain versus the Yen. Portugal approved a deal with the EU and the IMF for a 78 billion Euro emergency debt bailout over the next three years. A Chinese central banker stated that inflation in his nation would moderate over the second half of this year. A survey of German Service industries during April was 56.8, lower than expectations. A survey of Euro zone Service Industries during April was 56.7, roughly in line with forecasts. Euro zone Retail Sales during March were down 1.0%, lower than projections. Major US economic numbers to be released this morning include a US non-Manufacturing industries at 10:00 AM EST, — which came in lower than expected and has caused the stock market to trade loer.

Going to the Gold Charts:

Gold is trying to get back above the upper purple channel line —and has been trying to do so since the Monday sell off. We can see price is right there again this morning. With the weaker trend dominating the short term — and with unemployment data coming out over the next three days —— IT would seem the PIVOT point is going to be this upper trend line as to where the bull/bear battle is taking place. RESISTANCE for the remainder of the day is the 1545-1551 area. Support is the 1525-1531 area — and on a sell off — the 1496-1507 zone. In summary — the market is trying to forge a mid week Wednesday low — and the weaker trend is still in play this week. The key will be if gold can get above the upper purple line in the 1545-1551 area. The next key will be the ECB rate decision on Thursday. Pressure on gold to the 1525-1530 area is still in play —- and that spike low on Tuesday at 1515 seems to be another area where gold could drift to if the 1525 area starts giving way. AS LONG AS GOLD IS BELOW the UPPER purple line — the trend remains in pullback and consolidation mode until gold can close back above the 1550 area.

by Bill Downey

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