July 25th Gold Trend Analysis

In last nights website update resistance was listed at 1617-1625 and the high so far is 1623. Support was listed 1591-1596 and the low so far is 1600.

TRADES: Currently Long 1 gold at 1583 — stop 1547 close only
Currently Long 1 Silver at 35.15 — Stop 36.30 close only


London Gold Fix $1,618.50 +$30.50 LME

The gold market overnight managed a fresh new high and the trade generally managed that run up off ideas that the US is moving closer to a default. Apparently a large portion of the market continues to think that the US will avoid a default and that the US credit rating won’t suffer, but those views could come under increasing suspicion, as every day passes on the way to the August 2nd deadline. Suggestions from legislators, past Fed members and others that an unforeseen chain of events might go into motion, if a mechanical default is anticipated, has probably pulled in some of the buyers of gold this morning. News that investors overnight preferred German bunds to US Treasuries and weakness in the dollar, suggests that move to quality interest is capable of rising sharply in gold.

Equity markets in Asia and Europe are generally weaker during the overnight session, The US equity markets are down about 1/2 a percent. The US Dollar is slightly weaker against most of the major currencies this morning, but is posting substantial losses versus the Yen and Swiss Franc. Negotiators in Washington failed to come to any agreement over the weekend with raising the US debt ceiling. IT LOOKS LIKE THE 27th is going to be the deadline for some type of decision or extension. ANY EXTENSION and not DECISION — would probably be bullish for gold.

Going to the Chart

Prices have reached the first weekly target of 1617-1625 — There other target for the week is the 1640-1650 area. It looks like the 1580-1590 area is setting up as strong support on a closing basis for the week. Everyone is waiting for the Debt decision —and everyone expects gold and silver to pullback on a decision. While that may be the case — the longer term will continue to be bullish until there is a real change in Washington — whether forced by markets or on its own. From a chart perspective the trend remains up — and there should be a log of volitility upon an announcement. The stronger short term trends we watch are due to end this week and the weaker trend is due to arrive July 30th (plus or minus 72 hours) — If this plays out it would usher in a pullback into Mid August.

Resistance for the remainder of the day is the 1620-1625 area. Support is the 1603-1607 area. The trend remains up but we should be prepared for potential spikes on any decisions. As long as price remains above 1591-1596 the trend remains up. The best take at the moment is for gold to trade in the 1605-1625 area into Tuesday. IT looks like the 1617 area is the spot where there is buy/sell balance at the moment. A CLOSE ABOVE 1613-1617 favors higher into Tuesday.

by Bill Downey

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