June 28th Gold Trend Analysis

In last nights website update initial resistance was listed at 1506-1513 and the high so far today is 1504. Support was listed at 1483-1489 and the low so far today is 1496.

TRADES: Currently short gold at 1525 (Short term trade only)

News of the day

The markets continue with the end of the quarter bounce in equities with window dressing and short covering. Last weeks lows were right at the medium term support levels so a bounce at this time is standard operating procedure.

Euro — traders are waiting for the ECB votes and Greek discussions– as well as rate policy statement coming up. With all going on the debt situation — rates will probably be left alone — they are mostly jawboning and threatning to raise rates — but we think its just talk. The civil unrest in Greece continues to escalate. Athens strikes paralyze the city and police are trying to control the situation. Tensions are climbing. About 12K protesters are on the streets. The austerity measures need to be pushed through by the end of the week. The big vote is due tomorrow.

China has jumped into the fray saying they will be supporting Euro debt.

Oil —– traders are watching if market has absorbed the news from last week. Prices are up $3 dollars this morning.

5 yr Note Auction — Two yr notes were weak yesterday — will be important to see how placements go today for the 5 year.

Consumer confidence fell from 61.7 to 48.5 — as people don’t see the economy getting better and the angst continues to grow in USA. The headlines mask how bad it is — higher energy and a difficult WORK market continues to pressure confidence. Purchasing anticipation numbers call for fewer transportation and big ticket item purchases. Work anticipation numbers were very low as well.

S&P adjusted Case Shiller YOY index has biggest drop in over a year — non-seasonal adjustment show a SLIGHT higher price in April — usually a strong month for home prices.

Going to the charts:

Whether coincidence or not — gold has traded down to below 1500 just in time for options expiration yesterday and now price is attempting to hold and stage an end of month and quarter bounce attempt much like the stock market is doing.

On the shorter term charts — the 1480-1490 area shows a lot of support but on the daily chart (below) the stronger underlying support seems to be the 1475-1485 area where the 38% retrace number and the 89 day moving average currently reside and that support area looks like a stronger point than the current low this week of 1490. Nevertheless, it is very typical for the market to drift around at a round number like 1500. The market remains a bit uneasy as the purple channel line which supported all the lows during the 2011 uptrend gave way last Thursday and that has put pressure on as the short term traders are now trying to sell any bumps back up.

Key first resistance for GOLD this week is the 1506-1513 area going into mid-week Wednesday. The market has left its options open as to whether Wednesday becomes a low point for the week — or if we bump up higher. If we do bump higher this zone would be the first target. The 1519-1525 area would also be an important point for the week where the 34 day average (1525) resides. We favor a bump up into Wednesday.

On the downside — that 89 day moving average at 1382 and the retracement at 1474 continues to be the most important points to watch. The short term break of the purple channel and price below the 34 day average and barring bounces — the overall short term trend remains down.

In summary — the market remains mixed and with traders packing up for July 4th — volumes will continue to drop as the week progresses. The short term trend remains down — but a bounce into Wednesday afternoon sitll has potential to develop. The thing we have to watch is that the short term cycles we monitor are projecting lower prices into Mid July and with the drop that began last Thursday — it looks like they’ve kicked in early. After a four day drop — it looks like gold is trying to stage a bounce into Wednesday and with oil and stocks up —- we’d look for a move to the 1506-1513 area.

by Bill Downey

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