August 1st Gold Trend Analysis

In last nights website update gold resistance was listed at 1629-1634 and the high so far is 1628. Initial support was broken and 2nd tier support was listed at 1605-1611 and the low so far is 1607.

Trades Long 1 gold at 1583 — taking profits here at market-current 1627-1628 spot or 1629-1630 October
Long 1 silvr at 3515 — taking profits here at 39.75 market – current spot or 39.80 Sept Silver.

I save a sell in on gold now and a sell on silver to exit short term trades and take my profits. That doesnt mean we can’t go higher but that I’m ready for profits. Again this is short term trrades. If we close above 1633 I’ll look to re-enter in gold and in silver if we close above 40.50 the same. It has to be closing prices however. I’ll touch on it on tonights update or will email if things change.

CME News

London Gold Fix $1,613.50 -$.25

October gold at times this morning was trading as much as $28 below the Friday highs. In typical US fashion, a US debt deal was cut under the cover of darkness and under the less intense press coverage of the weekend. The vote has not yet completed as nothing is certain as the plan still has to get thru Congress. There is a lot of dislike on both sides of the aisle.

With the spending cuts close to half the original speculation and the spending cuts scheduled to take place in a two step process, the overall austerity from the package is thought to be minimal. With only $1 trillion in immediate spending cuts in the weekend deal, the drag on the US economy might be limited. While the markets appear to be presenting a “risk on” environment many traders are taking a wait and see attitude for equities and certain commodity markets. Given the low to high rise last week in October gold of $33 and July’s $157 total, some measure of back and fill action should be expected. Since the overall credit standing of the US might not be improved significantly it is possible that gold prices will avoid aggressive liquidation pressures. It is also possible that gold traders today will turn their focus back toward strikes in South Africa, as that news was largely ignored last week. Early indications are that some progress on resolving the strikes might be in the offing.
Equity markets in Asia and Europe were generally stronger during the overnight session, but the US equity markets have lost all of their initial surge and gains on the really bad economic numbers being reported this morning.

The US Dollar is weaker against most of the major currencies this morning, although posting gains versus the Yen and Swiss Franc. Both houses of Congress are scheduled to vote today on an agreement to raise the US debt ceiling that was finalized over the weekend. The official Chinese Purchasing Managers Index was 50.7, higher than expectations but those readings showed some of the weakest readings in 28 months. German manufacturing during July was 52.0, slightly below projections. Euro zone Unemployment during June was 9.9%, in line with forecasts. Major US economic numbers to be released this morning include the Chicago Fed’s National Activity index and June Construction Spending (DOWN AGAN) along with US manufacturing during July. ISM reporting at 50.9 — the lowest since 2009, new order are under 50, coming in at 49.2.

Going to the charts Today’s daily chart shows the short term cycles and key channel line for this week. The red circles are when weakness is most likely to dominate and the blue circles when trend is most likely to be strong. The weaker cycles were due to take effect last Friday or Today as the ideal time but no later than the end of trading on Tuesday. With the current global situation it is not difficult to make a case for higher prices. From a cycle perspective however, it favors a pullback into Mid August. The chart shows price caught in between the gold and purple channel lines. Which ever way price comes out of this area — favors seting trend for the next 2 weeks. Thus a close above 1633 will argue for a continued upside movement and a close below 1599 will argue for the pullback to mid August to be in play.

Resistance for the remainder of the day is the 1626-1633 area and is the key point to close above. On the downside support is the 1603-1609 area. A close below 1599 would favor that the weaker trend is in play until mid-month. Look for a wide trade range today in the 1610-1630 area as the bull/bear battle rages on in between these two channel lines.
In summary — it takes a close below 1599 to give a short term sell signal and a close above 1633 to favor higher. Inside this price range is neutral. Cycles are suggesting a pullback for a few weeks but price now needs to confirm. Until that time — I favor the pullback but a close above 1633 would keep the uptrend alive.



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"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."