June 14th Gold Trend Analysis

In last nights website update resistance was listed at 1526-1533 and the high so far is 1523.50 —– support was listed at 1501-1506 and the low so far is 1512

Trades: Status is the same as listed on the website daily button. If there is a change orders during today, we’ll send an update out.


London Gold Fix $1,519.00 -$5.70

To start the second trading day of the week, the gold trade seems to have a generally range bound environment keeping above the lows of Monday but below the highs as well. In addition to slightly supportive dollar market action this morning, the bulls are cheered by bullish predictions from Gold Fields Mineral Services, who predicted moderate gains in gold prices later this year. Apparently GFMS based their bullish outlook on residual strong demand from China, which reportedly imported 200 tons of gold in the 1st quarter compared to 260 tons of gold in all of 2010! The GFMS analyst also pointed to ongoing demand from central banks and even suggested that Indian spec’s would pick up their demand pace after the conclusion of the monsoon. The bull’s might also be indirectly cheered by the favorable equity market action, as the prospect of growth is typically more supportive of gold than fears of deflation/recession. Holding back gold prices in the early action this morning, was yet another Chinese bank (res) requirement increase. However, traders should expect a measure of volatility today in the wake of US data which is generally expected to show a moderation of US inflation and also some measure of slowing.

While equity markets in Asia and Europe were generally higher during the overnight session, early indications are that US equity markets would open with sizable gains this morning. The US Dollar is weaker against most of the major currencies this morning, although posting a minor gain versus the Yen. The Bank of Japan kept benchmark Japanese rates unchanged at their monetary policy meeting today. The People’s Bank of China raised bank res requirements for the sixth time this year. Chinese CPI during May was up 5.5% year-on-year, higher than market expectations. Chinese Industrial Production during May was up 13.3% year-on-year, roughly in line with market forecasts. UK CPI during May was up 4.5% year-on-year, in line with expectations. Major US economic numbers released this morning include the May Producer Price Index ( up .2%) and May Retail Sales DOWN .2% -, April Business Inventories (Up .8%) , and survey of store sales released during the session. In addition, Fed Chairman Bernanke will give a speech during the session.

In summary — most numbers came in near expectations — and it looks like up Tuesday in most markets as we bounce off of key levels in stocks and in the metals. This might be suggestive of bounce into Wednesday.

Going to the charts:

Perhaps the most important chart for the week remains the short term strong and weak cycles chart we’ve posted today. The red circles are when the weaker trends are dominant and the blue circles are when the stronger trend is dominant. The stronger trend is due to begin this week. Tomorrow is the ideal day for a turn — but plus or minus 72 hours from the point is usually the standard deviation. AS LONG AS PRICE remains inside that lower purple channel line — the potential for gold to carve a low this week and begin a move higher into the first week of July would be in line with the trends. Do all of these trend changes work ? NO —- not all of them. But as you can see they are worth keeping an eye on them. —- last JUNE’s strong cycle did not work —- and that was the start of the seasonal pullback last year. But for now — we need to be aware that a low is due this week.

Today’s drop to 1512 and subsequent move back up to 1523 is where the most important resistance is —- 1526-1533. This is the second day that holds the lower end of the range on the downside and the purple channel. This looks to be the key area the bears will have to break. As long as that 1501-1506 area holds – the uptrend is still intact on the charts. ON THE OTHER HAND — gold has to climb and close back above 1526-1533 in order to favor the stronger trend is working.

In summary — We need a close above 1526-1533 to begin favoring the stronger trends are exerting their influence. The current pattern tells us to WATCH 1523-1526 on the upside ————- and 1510-1513 on the downside. That’s where the traders are playing at the moment ——– AS LONG AS PRICE IS ABOVE THAT LOWER PURPLE CHANNEL LINE — the momentum of the uptrend will remain intact and that the STRONGER TREND is trying to return to its influence.

by Bill Downey

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