May 27th Gold Trends

In last nights website update resistance was listed at 1526-1534 and the high so far is 1534.50 ——–support was listed at 1513-1520 and the low so far today is 1519.



London Gold Fix $1,525.00 +$3.50

Global equity markets were higher during the overnight and early morning hours, helped by carry-over strength from Thursday’s upside in the US. The US Dollar broke down to a new 10-day low overnight, partially in response to a drop in 10-Year Note yields to 6 month lows. The weakness in the US Dollar compared to the Swiss Franc pushed that cross down to a new low. A report on Japanese inflation overnight showed its first monthly gain since December 2008, but continued weakness in retail sales in Japan suggests that it may take more time for the country to recover from the March earthquakes. The G8 meeting in France turned early morning discussions to the Euro zone debt situation and its potential impact on the global economy. While the Greek debt issue wasn’t throwing off significant and overly fresh news overnight, that issue remains a key issue in the market and with the US economic numbers this week creating some doubt for the standing of the Greenback, the safe haven mantra is credible once again. In fact, rumblings from the IMF this week, about potentially withholding the next aid payment to Greece in June, has probably left the Euro debt issue in place for the coming 4 weeks.

Consumer confidence in the UK for May came in better than expected. The latest round of inflation and sentiment readings out of the Euro zone ticked lower on the month in May. The market is on the lookout for May inflation data out of Germany this morning. This morning’s economic calendar in the US will get a read on Personal Income and Spending , which is expected to come in slightly below March levels. The second tier of economic data provided a look at May US consumer sentiment and April Pending Home Sales down big —– 12% —-and 26.8% YEAR OVER YEAR. (Note: My fundamental confidant “Darth” has been calling this data and he continues to see a big slide for the USA)

Going to the charts

This mornings high prices was a change as metals keep the upside all thru the night even into the reports. The gold market might be smelling QE3 ——as the US economy —- looks to be in trouble.

This weeks price action stayed within the 50% and 61% retrace range all week long. The only exception was the pullback low on Thursday near 1515 (see red arrow furthest to the right). But even then — price supported right on the Fan lines. Today’s push to 1534 is right on the 61% retrace number. ANY CLOSE ABOVE THIS AREA should lead to a swift move towards the 1445-1455 area where the 78% retrace and fan lines are on the chart below.

Resistance is 1536-1538 for the remainder of the day — and then 1544-1552 on any push higher from here. Support is the 1519-1523 area. A CLOSE ABOVE 1533 WOULD SUGGEST one more push higher next week before the short term strong trends revert back to the weaker cycles.

In summary — price is within the 50 and 61% retrace at 1520-1533 — any close above 1533 favors higher into next week. There is now minor support today at 1526 also going into the close. As long as we close above 1515 —-the trend remains up.

NOTE: We’re long gold from 1512.20 —— we’ll be raising our stops into next week on the website.

by Bill Downey

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"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."