August 3rd Gold Trend Analysis

In last nights website update initial resistance 1672-1676 and the high so far is 1672.50 spot and 1675.10 December Futures

Trades: currently flat — looking for a set up.


London Gold Fix $1,667.50 +$43.50 LME December gold prices overnight made another new all time high of $1,675.10 and the trade generally is holding a large portion of that move into the early US Wednesday trade. Apparently gold garnered some additional move to quality buying off the news that a lesser known Chinese firm cut the US rating one notch and perhaps some buyers were motivated overnight off ongoing economic and political turmoil in Italy.

Gold also seems to be capable of benefiting from evidence of slower growth in the US, as that apparently increases the overall macro economic uncertainty in the marketplace. Once again, gold showed very little interest in overnight news of an increase in gold production from a large Chilean minor, as the focus of the gold trade remains locked onto move to quality type issues.

Apparently the gold market gives little credencence to lower crude oil prices so far. It did seem as if gold rose in the wake of slowing from the US yesterday morning and Factory orders and the ISM Non manufacturing readings were lower than expected, adding further strain to stocks. Some gold traders think the Chinese concerns over US Treasury market volatility, are simply destined to increase interest in gold directly ahead. Just to add in another bullish theme, it should be noted that some Asian gold traders are starting to anticipate increased seasonal buying from India.

Equity markets in Asia and Europe were generally weaker during the overnight session, and US stock markets ware open with a current 50 point drop. The US Dollar is stronger against most of the major $$$$ so far this morning, although posting a strong gain versus the Swiss Franc as the Swiss National Bank unexpectedly cut that nation’s benchmark interest rates this morning to try and slow the rise in the franc. The Italian Finance Minister met with the head of Euro zone finance ministers for emergency talks. Euro zone Retail Sales during June were up 0.9%, higher than expectations. Euro zone service industries was 51.6, slightly higher than forecasts. Major US economic numbers to be released this morning include US employment and US job cuts released before the opening, and June Factory Orders. The US numbers were once again disapointing.

Going to the chart

We’re using the gold ETF (GLD) today. The resistance lines are medium to long term highs so they are important. The 1675-1680 area seems to be forming resistance today. That is the big number to watch. With the Dow plunging again down 150 at the moment the potential for gold to continue higher can’t be denied. The short term weaker cycle window closes today. Any move above 1680 on Thursday will favor the 1700 area and the uptrend will still be in play with the potential for an inversion. Since its mid week Wednesday the next few hours should be watched carefully. Resistance for the remainder of the day 1675-1680 (spot) and support is the 1661-1664 area. Today looks like a short term turning point. A peak today in gold with a pullback into Thursday or early Friday morning is the usual route — but in this market anything goes at the moment. The trend is still up and price has not given any signals as of yet. Watch 1675-1680 — its key today. In summary — there is probably not much we can rely on to be normal today. Gold remains very strong. If I see a set up on a short term trade, I’ll send out an email. Watch that 1675 area —- if gold can’t get above there, then we should see some type of pullback into Thursday. The trend is up but watch the next few hours carefully. RESISTANCE 1675-1680 ——- first support 1659-1661 and then 1652. IF there is to be a pullback, this is the part of the week that it usually happens.

by Bill Downey

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