6th April Gold Trend Analysis

In last nights website update resistance was listed at 1458-1467 and the high so far is 1461. Support was listed at 1443-1449 and the low so far is 1451.

London Gold Fix $1457.00 +$22.50

The gold market breakout higher yesterday has price trading near the 1460 area this morning as Euro zone debt concerns, expectations of a potential US government shut down on budget debate, inflation concerns, and Brent crude oil pricing above $122. With commodity prices trading higher this morning, the inflation trade remains active in the headlines.

News that a Chinese company was seeking to acquire two South African gold mining companies also fed the allure of gold, as demand expectations from China are a key component of the bull case. It is possible that fears or perhaps from some, hope of a US government shut down is providing gold with some lift, especially since the austerity effort from the Democrats and the White House seems to fall short of international austerity efforts. In the end, seeing the US offer up and get by with minimal deficit reduction efforts will be seen as inflationary by the gold market. In some trader’s minds, a lack of aggressive deficit reduction is also reason to increase the safe haven value of gold, as a credit down grade of the US would probably fuel demand for alternatives to Dollar based assets.

The Dollar is weaker against most of the major currencies during overnight trading, although posting a gain versus the Yen. There was a credit rating downgrade of seven banks in Portugal by one level or more this morning. Japanese technicians have been able to stop the leak of radioactive water from reactors at the Fukushima power plant into the Pacific Ocean. UK Industrial Production during February was down 1.2%, weaker than expected. Euro zone GDP during the fourth quarter was up 2.0% year-on-year, in line with forecasts.

The big gold producer stocks had a big move yesterday and for the first time in a while seem to be signaling higher prices in the big mining companies.

Going to the price chart in gold — the breakout higher out of the March consolidation favors the upside. Resistance for today is the same as listed last night on the website — perhaps to the upper end of the range near 1467. Support is the 1444-1449 area.

In summary — the trend is still up. With the breakout from yesterday we have to favor higher but the 1467-1474 area might provide resistance and the highs for this week. The key now will be if price can sustain above the 1439-1444 area from which the breakout originated on any pullback. With mid week upon us — gold usually puts in a high near this timeframe. The market may want to go back and test the 1444-1449 area as we move into Thursday as short term trends are also due for a pullback. The trend is still up — but a pullback or consolidation near this area would not be out of the ordinary.

by Bill Downey

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