Gold Trend Update

While some analysts overnight suggested that gold prices are getting down to a level where some mining operations are unprofitable, that is probably only a small number of fringe producers. Therefore for declining production to effectively countervail big picture, broad based, physical commodity market liquidation pressures that have been heaped on the back of the gold market of late, the headlines will have to be frequented with more significant and distinct threats of idled production.

In the short term, gold will continue to see its direction set by the ebb and flow of QE tapering sentiment and with the Dudley comments yesterday, it is possible that the bear camp isn't feeling quite as confident at the end of this week, as they were at the beginning of this week.

Chinese equity markets seem to have recovered some confidence, as the credit fears have continued to drain from the headlines. Mainland Chinese shares were up notably overnight, which could suggest that the financial and shadow banking flap is indeed on the mend. European shares were apparently uninspired by the EU summit news, or perhaps the trade was simply unwilling to take on fresh positions on the last day of the month and quarter. US stocks are working off sell off from this morning.

Gold Chart

On a short term basis, gold has moved back up to the resistance line it broke after the NY close yesterday. No doubt there’s short covering going on as shorts are booking profits to show great gains for the quarter.

This channel line should be initial resistance today in the 1216-1222 area. Support on an hourly basis is now 1187 and 1202 for the remainder of today. With gold reaching 100 dollars from the 200 day moving average yesterday, odds favor a bounce of some measure should be in play. The trend certainly hasn’t turned up, but with gold reaching some major support areas on the weekly chart it’s certainly possible that a medium term low is setting up.

Medium term cycles

The weekly chart shows gold has reached a major uptrend line and favors some support coming in. There are quite a few factors favoring that. Most important is that a new quarter begins and markets have a way of having big sentiment changes during these times. Perspectives always change in the same way that when the New Year rolls over, we all seem to make some resolutions for the New Year and trend changes most often occur. The same thing happens during the spring in the late March time period. The big gold sell offs from last year accelerated at the beginning of February and April this year, and last year’s selloff bottomed right around June 27th and chopped around until August and the move from 1560 to 1800 developed. In fact even last year’s high took place only 2 weeks after the autumn season (Sept 21st) took place. As you can see by the chart, gold is now in its medium term cycle window (June 21st - plus or minus 2.5 weeks) and a low is due to take place in this time frame.

Weekly Chart

The weekly chart in gold also shows we’ve reached a major trend line that favors gold to make some type of support point and bounce. If this is the case a move back towards the 1300-1350 area would be favored. A lot will depend on China’s liquidity crisis and how they move forward with that. As long as the crisis doesn’t spread any further and begins to affect the equity and oil market, we could see an initial lull in the liquidity crisis. With that said odds favor that the markets are going to be volatile and swings in both directions could be the main action we see in early July. The gold bull market is not over and while it is still possible to see 900-1000 dollar gold, this 1150-1190 area in gold is one of the long term PRICE POINTS that need to be watched for the potential of a major low forming. The open interest in gold shows that the longs have been completely flushed out and once the funds begin to cover in gold it should unleash a rally of sorts. The ideal scenario at this point will most likely be gold will form some type of consolidation over the next month and rally towards the 1300-1350 area. The major time lines for gold are the July 7th-12th period or the 19th-21st with important cyclical action during that time. At the moment, odds favor ONE MORE DIP IN GOLD to complete a full five waves down and a bottom in gold. Once the next bounce begins, the price patterns will offer clues as to whether it’s an impulsive move or a counter trend one.

In summary, a medium term cycle low is coming due and a halt to the downside is favored between now and July 19th-21st with July 7th (plus or minus 72 hours) as another place to watch. NOTE at the very far left of the chart the 1150 area as an important price point of the 2011 low that developed in August of that year and from where the final bull wave up developed. Now that we have erased that final wave point, it’s a high consideration for a price low in this area. We can’t rule out a final plunge to 900-1040 but that will only develop if the liquidity crisis moves up another level. A major German election is taking place in September and Ms Merkel is shifting her stance from“Euro togetherness” to an each country for themselves theme in an effort to give the voters what they want. Germany is pretty much fed up with supporting the other nations. This will be a major factor in the markets as well. For now the China liquidity situation will be the biggest effect from a commodity perspective so keep your eyes on that situation.

Silver Chart 

The long term correction in silver is reaching the point where the end of the downside is most likely coming into play. Notice we are arriving at the point where the final leg up began in silver. In other words, that final move up has been erased and the only thing remaining now is for the open interest in futures to complete the washout like in gold. The final two support points for silver on the charts are this current area 17-18 and there’s one final trend line at 14-15 that can’t be eliminated. The biggest technical factor in silver has been the fact that we closed below the 2008 high at 21.35. Those who follow Elliot Waves know this signals a potential move back to where it started from. However, I don’t really think we can bank on such a development as a guarantee. One thing I will say is that our own long term indicator turned bearish at 28.30 on March 31st and as we mentioned then, the only other sell point we got in this indicator was during the 2008 crash. We said then that if this indicator performs in the same manner as 2008, that it would indicate a move to the 18 dollar area and a recovery process would favor a move back up from that point into the November time frame. Thus the first part of the scenario has taken place as the low in silver this week was 18.19. Now we’ll have to see if this downtrend line and this rally point makes a low in the 17-18 area. We do feel that at the very minimum a bounce is going to take place that should move price back up to a test of the 21-23 dollar area, ideally 21.35 where the 2008 high was registered.

In summary all trends are still down on the metals but they have reached a point where a medium term low should be taking place. The “look” that the price pattern gives us on a bounce will hopefully give us indication as to whether it’s impulsive (bullish) or whether it’s just a counter trend move.

GOLD CURRENT TRADE 

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BGT 1 Mini Gold at 1184  Stop 1170 

on 28 June 2013

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YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS 
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. 

 Do your own due diligence. 

No one knows tomorrow's price or circumstance. 
 I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader. 
I do not accept responsibility for being incorrect in my speculations on market trend. 

 King Regards