May 6th Gold Trend Analysis

In last nights website update Resistance was listed at 1488-1496 and the high so far today is 1495. Support was listed at 1460-1468 and the low so far today was 1470.

CME News

London Gold Fix $1,487.50 -$26.25

While the gold and silver markets this week have seen some signs that sharply lower prices have prompted some dip hunting demand, the big picture headline chant, that the bull market in commodities is over, has kept interested interest limited. The gold market certainly held up better than the silver market this week, perhaps because silver was generally deemed to be the leadership market into the end of April.

Against the back drop of this week’s avalanche in prices, talk of Indian seasonal demand has boosted recovery today also. Not surprisingly, the trade was aware of the potential for seasonal buying in India, but the fear of broad based technical liquidation by investors and traders simply took the upper hand until the good US data this morning. With the last COT positioning report pegging the non commercial and non reportable net long combined positioning, at 288,000 contracts and since that data was gathered, June gold prices to the recent low have declined only by $40 and that might prompt some suggestions that more weakness is possible! However, the big range/big volume trade on Thursday has some technical traders predicting a near term low in prices, but the talking heads in the press have continued to tout an end to the commodity bull market.

The USA numbers were deemed as better than expected — called the best in a while (their words –not mine). Yet April unemployment was up to 9%. Commodities have bounced up since the data as well as equities.

Other News

ECB President Trichet commented that the recent commodity sell off was good from an inflationary and economic recovery point of view. Troops have been deployed around Syria in anticipation of anti-government protests during the day. The Japanese Finance Minister stated that his government was watching dollar markets closely, but did not threaten intervention against a stronger Yen. The French Trade Deficit during March was 5.75 billion Euros, smaller than projections. UK PPI during April was up 5.3% year-on-year, higher than expectations.

Going to the charts:

Yesterday’s low was right on our lower dotted trend line and a bounce is under way. Resistance is the 1498-1505 area for the remainder of the day. Support is the 1478-1483 area. It looks like we’ve made a temporary bottom, but next week will be the key. We’ll review the longer term picture on the weekend update. With the stronger short term cycle not due to turn up fully until mid month, we might see some backing and filling next week. We’ll be looking at that also this weekend.

by Bill Downey

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