July 12th Gold Trend Analysis

In last nights website update resistance was listed at 1555-1562 and the high so far is 1556. Support was listed at 1539-1544 and the low so far is 1541


GOLD – We have had a long order on the website at 1538 – We missed it by 4 dollars on Monday and by 3 dollars today.

SILVER – We are long at 35.65 and 35.17 for an average of 35.41 — Stop 33.08 intra day

London Gold Fix $1,544.50 +$1.00

The news of the day is fully locked in the Euro and US debt situation. Italian bonds were sporting 6% this morning and the risk cost is higher than Mexico and Indonesia. On going emergency meetings are happening and Ministers agree that they want investor participation in restructure. Bank TESTS are due this Friday. There was a successful auction earlier today and that seems to have taken the pressure off of Equities.

The S&P traded all the way down under 1300 in pre market activity — and then magically the buyers appeared and have moved the futures up over 20 points from the lows. GOP leaders in USA are having their own debt meetings — and the Senate Minority is on the floor making his speech on deb. The Capital Hill meetings going on now are to meet back at the White House today. With 22 days to go on the debt ceiling, and a 7 day process to move thru Congress, time is running out. The BUSINESS community is more concerned about the DETAILS of the plan and not the default.

Despite ongoing global worries, the gold trade overnight wasn’t able to extend its recent pattern of strength as price was stopped right at the 1556 resistance zone we listed on the webiste (1555-1562)

We discussed on the website the potential of a short term peak after 7 up days and the pullback potential.
So far, August gold has been unable to take out the prior session’s highs despite renewed talk of default in the Euro zone and a lack of progress toward a US debt deal. Part of the resistance action in gold might also be the sharp ongoing rise in the USA dollar. It is also possible that gold was partially undermined by news from China, that their January through May gold output managed a rise in excess of 3% over year ago levels. In the end however, the gold market doesn’t appear to be overly interested in the supply side of the equation at the moment, as the ebb and flow of investment and safe haven demand is probably the real driving force for prices.

Somewhat surprisingly Gold Fields Mineral Services floated a bearish quarterly price forecast and perhaps that fostered some of the profit taking action seen since the highs were posted on Monday. But ongoing concern could be difficult to remove from the current equation and therefore many traders think that weaker gold prices are likely to attract fresh buying. The lows of the day occurred at around 7 am EST and then moved higher into the US Trade Balance report. The highs of the day were registered there and price has been sideways since then in the 1548-1553 area.

The US Dollar is stronger against most of the major currencies, although posting losses versus the Yen and Swiss Franc. The Bank of Japan kept Japanese monetary policy unchanged at their meeting today. Chinese Premier Wen stated that controlling price increases is the top priority of his government. German CPI during June was up 2.3% year-on-year, in-line with expectations. UK CPI during June was up 4.2% year-on-year, lower than forecasts. The UK Trade deficit during May was 8.49 billion Pounds, higher than expectations. The first leg of the Treasury’s monthly refunding, a 3-Year Note auction, will have data announced at 1:00 PM est.

NOTE —-The Fed Open Market Committee will release the minutes from their June 21-21 monetary policy meeting at 2:00 PM EST —- and that might keep the metals in a trading range until then. It may be from that point that gold decides to make its move for the week.

Resistance for the rest of the day is 1555-1561 and support is 1538-1542 —- 2 pm EST is the next watch as the Fed mins come out.

Going to the Charts:

The 1550-1555 resistance area that has been in play for the last 8 weeks is once again being challenged. Price has been trying to break thru now for two days. The trend higher is favored — BUT WE MUST GET ABOVE 1560 on a CLOSING basis to get out of this range. THUS there is still the potential for gold to pull back from here. We think the the chances of moving higher are greater — but with a buttonwood day daily turn today and the next goldtrend coming due — there is a potential for gold to pull back one more time. We missed getting long by a hair again this morning — but if price closes above 1560 — I’m going to enter anyway expecting a move to the 2nd tier resistance of 1588-1607. Support remains the 1533-1538 area — but 1540 is also showing up as minor suppot. In summary — things are mixed — the price pattern favors higher — but it might take a bit more to get the push. A FAILURE to close above 1560 would leave the weekly support of 1517-1525 still open. Price will most likely stay in this area until the Fed notes today at 2 PM. ONCE PRICE BREAKS above 1560 —the move towards 1600 should be swift. ANYTHING CAN HAPPEN AS THE DEBT MEETINGS ARE GOING ON IN EUROPE AND USA ———–so nothing can be eliminated. The chart clearly shows the TRADING range of 1475-1575 — and while we are at the upper end — we still need to make that push higher. We favor that scenario — but like i said — anything can still develop.

by Bill Downey

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