July 22nd Gold Trend Analysis

In last nights website update resistance was listed at 1596-1603 and the high so far today is 1605 —support was listed at 1574-1583 and the low was 1583.

Trades — I’m long gold at 1583 and have a LONG order at 1559 to add —-stop is 1547 intra day
I’m long silver at 35.15 and have a LONG order at 37.65 to add—-stop is 36.30 close only

London Gold Fix $1,588.00 -$12.50

October gold in the early Friday US trade sits marginally above this week’s consolidation lows. Some traders were fearful of selling pressure in gold this morning, off the latest Euro zone debt package for Greece, but so far gold has avoided concentrated liquidation pressure. While many “move to quality” players in gold have turned their attention toward the US debt threat, seeing the Euro zone situation come under some measure of calm seemed to have weighed on gold prices but we think it was more of options funny business taking gold under 1600 again. Options expire next week — and if my hunch is right —they have already covered most of their positions at the 1600 call strike price.

However, one could make the argument that the US debt situation dwarfs the debt load problem in Greece and therefore events in Washington over the coming sessions are likely to become all encompassing. The trade is aware of a vote on Cut, Cap and Balance legislation in the Senate at some point soon, but the potential that vote will take place during market hours today could be very small.

Gold prices might be drafting some minor support from news that a Russian gold miner might be poised to pay dividends, as that news might attract favorable attention to gold investments. While some economic readings from Europe were positive overnight, the potential lift from positive economic views might have been countervailed by suggestions from the Chinese overnight that fighting inflation would continue to be their main impetus into the end of this year!

While equity markets in Asia and Europe are generally stronger during the overnight session, the US equity markets are open with a 50 point loss this morning in the Dow. The US Dollar is slightly stronger against most of the major currencies this morning. The Chinese President stated that stabilizing prices in his nation remains a priority for the rest of this year. German business climate during July was 112.9, lower than market expectations. Euro zone Industrial New orders during May were up 3.6%, higher than market forecasts. There are no major US economic numbers to be released this morning.

Going to the chart

We were cautious last night on the website ——but stayed with our long position pointing out that Friday’s are usually up days — and we discussed the battle would be 1585-1595 and that is pretty much how it played out. The key 23% retrace area held like a charm all week — and that continues to suggest there is still strength left in this market. The current outlook from last night remains in place — a short term high is due on July 29th (plus or minus 72 hours). WE WANT TO SEE GOLD CLOSE ABOVE 1590 today —–and above 1615 would even be more bullish. Resistance for the remainder of the day is 1607-1613 and support is the 1579-1585 area and there is minor support at 1590-1595. Weekly resistance is the upper line at 1625 and support is now coming up to the 1580 area by Monday. In Summary — our outlook on the website for a trading range has also played out since Wednesday as we felt that the boyz would be lowering price below 1600 to cover their calls. The new modus operandi has been to do it the week before expiration (and this is now the third month they use this new method).

It is possible that we could have one more day here where they pin 1600 —- but that should be just about over. In summary — the trend remains up ———a close above 1590 keeps things chugging next week —a close above 1615 would suggest we get an end of month high. The trend remains up. The only thing to watch for is if the USA announces something on the debt ceiling. Other than that — we favor higher into next week. Watch 1590 —- we want to close above that level to keep the upside in play next week. Have a great weekend.

by Bill Downey

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