May 25th Gold Trend Analysis

In last nights website update resistance was listed at 1526-1534 and the high so far is 1529.10 ——support was listed at 1513-1519 and the low so far is 1521.10


London Gold Fix $1,527.00 +$6.25

World stock markets traded lower overnight, led by weakness in China and Japan. The weakness continued in Europe, with a great deal of focus on possible solutions to the Greek debt situation. US equity markets spent most of the morning session recovering from an overnight plunge to new 5-week lows. With Facebook type Stocks being the NEWS as these stocks move up — we are reminded of the 1999 dot com bubble —- and the 1929 RADIO STOCKS CRAZE. Things must be pretty bad with Facebook type STOCKS are the rave of the day and get valued at billions of dollars. The more things change in the markets —the more they stay the same.

The US Dollar and gold is on a higher track this morning and seemed to benefit from safe-haven flows out of Europe. A number of EU officials have made the newswires this morning, suggesting that a Greek debt restructuring may be the best solution for Euro zone. This morning’s June Consumer Sentiment readings in Germany came in at the lower end of expectations. Revised Q1 GDP in Great Britain matched preliminary readings, up 0.5% on the quarter.

News of that slight decline in German consumer confidence overnight probably adds to the concern for the Euro zone, but that news has also served to hold the Dollar relative to the Euro. While the gold market didn’t seem to give S&P comments regarding the prospect of a Chinese banking profits squeeze much credit overnight, that could be a factor that increases global interest in gold and other alternative safe haven instruments.

In looking ahead to the action today, gold has initially spiked five dollars in the wake of US Durable goods which was much weaker than expected, down 1.7% — but left the US dollar unchanged so far. The “spin” is this is a seasonal adjustment problem — not an order problem — and that the bulk of the issue is that BOEING orders were down. (OK….SURE)

It is not clear if gold will be undermined if progress is made on avoiding the US debt ceiling, as news reports overnight suggest that the US might be poised to extend the ceiling, in exchange for $1 Trillion in spending cuts. With a slight rise in derivative holdings of gold noted yesterday afternoon, gold price has initially seen favorable demand in the early US Wednesday trade.

Gas INVENTORIES in USA rose again this week with huge buildups as the $4.00 threshold has curtailed buying. JUNE GOLD OPTIONS EXPIRE TODAY as well.

Going to the Charts:

The short term trends that turned up last week on the 17th remain in play. Price is trading in the 1520-1530 area over the past 48 hours and the next level of interest is the 1534 area where the 61% retrace area is. It looks like the pivot is the 1525-1530 area today where a lot of back and forth is going on.

With a new high today on mid week Wednesday — prices are favored to consolidate going into Thursday as a lot of economic data is scheduled at weeks end — Thursday we have initial jobless claims, US preliminary GDP — and a slew on Friday with Japan CPI and Retail Sales, German CPI, and US Core Price Index, Personal spending and Income, University of Michigan Consumer Sentiment, inflation expectations and US pending home sales.

In summary — the short term uptrend is still in play —resistance for the remainder of the day is the 1534-1538 area and support is the 1516-1520 area– We should see some consolidation as the big reports come out on Friday — and with inflation data on tap, consumer sentiment, and a host of others, there should be some volitility as these reports come out.

by Bill Downey

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