Gold Trend July 24/2013

Long Term ~ Neutral – Need a monthly close above 1800 to confirm the bull market final phase underway

Medium Term ~ Bearish - Need a close above 1525-1580 to neutralize.

Intermediate Term ~ Bullish– GLD and HUI neutralized the downtrend before gold and now all three are in bullish mode. Odds favor we’re heading towards 1360 – 1380 if we take out 1354.

Short Term ~ Bullish – The only question is the next short term cycle due to begin by Friday. It could put a two week high in place. If not, then gold is heading towards 1380-1420.  

Support and Resistance

Initial Resistance 1350-1360 and 2nd tier 1375-1380

Initial Support 1317-1328 and 2nd tier 1294-1305

CME GROUP NEWS

In early morning trade today gold consistently gave ground off of yesterday's peak. Some strength in the dollar undermined gold early and it appeared as if the metals were undermined off the latest Chinese storyline. It is possible that gold saw some delayed buying in the wake of soft US data as that again decreased the prospects of US tapering. Some analysts suggest that Congressional hearings on bank trading of commodities could have undermined markets like gold today. However, gold reversed the down trend off of support and rallied back to resistance points by the time the Wednesday Asia markets were trading.

Gold Overview

With the bankers holding the LONGS the shorts have to pay dearly to cover. The COT and seasonal remains bullish and the physical inventory continue to deplete. High rates over spot are being reported in some Eastern markets and that seems to add substance to the overall supply at the moment.

The chart below shows the massive drain of ELIGIBLE gold available to fill any futures contracts that wish to take delivery. And there’s not much there at the moment. This has prompted renewed talks from the Sinclair crowd that a COMEX default is coming. If that should develop it’s a game changer of huge proportions.

The Gofo (gold forward rate) continues to show a shortage of gold available for lease. With the seasonal trend now in favor of gold, the situation remains bullish on the intermediate term. There can be a short term pullback due to cycles, but there’s been a change of attitude duly noted in gold in the last two weeks.

KEY RESISTANCE and Pivot POINTs for the WEEK

R1 and R2 are 1 and 2 standard deviations of resistance to the pivot point and S1 and S2 are supports of 1 and 2 standard deviation.

Last week's number to watch was 1299-1315 and 1347-1360 & the high going was 1299.70.

This week’s number is 1335-1345 and 1360-1380. We’ve reached 1349 on Tuesday. The 1360-1380 is next potential. Resistance from pivot traders will be 1356-1364. The 1341 area is the pivot for Wednesday. Supports are 1318 and 1333.

Gold Hourly Chart

We had been favoring the upside last week, and we’re waiting for a close above 1305, and the consolidation finally broke out higher within 15 minutes of the open on Sunday and price moved from 1295 to 1315 in two minutes and has been strong since and no pullback to 1305 occurred. Resistance of the upper white channel line was hit on Monday and Tuesday pulled down to 1326 which was the first mini moving average support points. At the moment, they continue to be 1st support at 1324-1328. There’s a potential support at 1318 and 1333 also on daily and weekly pivot support points. Other than that the 1294-1305 area is next support if we get a short term cycle pullback. If we could get a return to that area it’s a strong consideration for a long trade. But it’s still possible to move to the 1370-1380 resistance where the two purple lines cross on the chart below. That would be the next area of resistance. One thing that was important on Tuesday was the fact that price dropped near 1326 and found support. The 1322 area if you recall is the LOW from the crash that first supported price for a good month in April. Thus it’s an area of importance as far as whether that begins to hold on a weekly closing basis. Right now the trend is still up as we enter mid week but a Wednesday high for the week has a chance of developing. With the bankers holding the longs and the funds holding the bag, they are trying to cover and that’s why there’s been no pullback.

Gold 8 hour chart

The 8 hour chart of gold gives a better view of the breakout that occurred Sunday night just 15 minutes into the session and lasting a full two minutes. Since then gold has continued to move higher. The Tuesday low was at a channel support line and as you can see there is resistance at around 1350 and then the 1370-1380 area should this upper channel be taken out. Support is the 1290-1305 area on pullbacks but the line we hit this morning at 1326 also is a support.

What's Next?

The next short them cycle window is open until Thursday. We’ve reached the first target potential for the week in the 1335-1345 area. If gold breaks above 1354 it’s possible that the 1370-1380 area will come in play. With Mid-Week Wednesday here, we’ve already made a new high for the week in Asia trade and Wednesday’s are usually where the highs and lows for the week occur. Not always, but often. Thus odds favor we should make the high for the week today (Wednesday).

The big question really is whether the short term trend change for the next two weeks is going to provide a pullback or not. ODDS do favor it will, but as we’ve mentioned, once or twice a year, we do get a back to back cycle in the same trend direction. If this is one of them, then gold will move to 1370-1380 and perhaps 1420. If we do get a move of that magnitude, ODDS favor it will be a peak that lasts until the October timeframe and we’ll get a final pullback in gold into that period.

Wednesday does favor a high for the week, but there is no doubt the short and intermediate term trends are up. The 1350-1354 area should provide resistance on Wednesday and support at the moment is the 1317-1328 area.  

The short and intermediate term trend is still up.  If we get a short term cycle pullback, it will most likely be a buying opportunity.

Bottom Line

Short term is mixed, but intermediate and medium term continue to favor we have at least a bottom that should produce a good bounce into September. If we do continue higher into the next cycle, then an August high (instead of September) will develop. That August pullback will also be a good time for a long entry but if August remains a high, it could become a high that lasts a month or two. It’s going to come down to whether the global economy recovers and for that we need to look at China.

Here’s the concern there from Private Wealth. If his observations are correct, it brings into question the ramification of a deflationary event that we have been discussing since last February, would still be in play.

Here’s what private wealth had to say about China.

Over 95% of “analysts” are missing this, but it is a fact. If you ignore the ridiculous GDP numbers (which even China’s Premiere has admitted are a joke in the past) and look at more accurate metrics, its clear China is collapsing at an alarming rate. Case in point, Electrical consumption rose by just 2.9% in the first quarter of this year.

How on earth can you generate GDP growth of 7% when you electrical consumption is rising by just 2.9% is beyond me. And when you consider that China is experiencing this weak growth despite having pumped over $1 trillion into its economy in the same quarter (an amount equal to 14% of China’s total GDP) you begin to understand the scale at which things are imploding in the People’s Republic.

End of quote

The one thing about the private wealth concern of a continued deflationary event that might not develop is the fact that interest rates are rising. They don’t rise during a deflationary event.  Or haven't in the past.

The fact that interest rates are rising might be the first sign that the deflation is over. The weekly chart on rates has not broken out higher but is at the trend line (See last week’s weekly update). If the deflationary scenario is to continue, interest rates will begin to trend down again. If they continue higher, then the potential for the deflationary scenario to be complete will come in play. That would mean that the stimulus coming out of China, Europe, UK and USA will take effect and provide some kind of lopsided recovery. A lot of this is going to play out after the German elections. If Dutshebank is in as much trouble as is being reported, it could set off a panic if it has to be supported. But we’ll have to wait until mid-September for that to play out.

The final thought is that interest rates would already be much higher without the support the Fed has provided.  They have probably bought much more that they even admit.

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GOLD CURRENT TRADE 
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SHORT 
Oct Gold At 1337.50
  Stop 1363.50 On July 22/2013
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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