In looking at the overnight action on the charts, the April gold contract seems to have favored the downside with this morning's lows sitting only $8 an ounce above this week's lows. While gold could have been supported by news of favorable Chinese economic activity overnight, gold doesn't appear to be tracking commodity market fundamentals and therefore declining safe haven interest has seemingly exerted a small measure of pressure onto gold prices.
Indian importers were mostly inactive overnight, with the Asian trade in total failing to give off a definitive direction. News that Harmony mines was set to leave a mine closed due to safety and security reasons could have lent some support to gold prices but the gold trade currently seems to be unmoved by minor supply side developments.
Underpinning gold prices this morning, is news from yesterday afternoon of a rise in a particular gold derivative instrument which was effectively the first rise in holdings in several weeks. Another potentially supportive development for gold, is a reduction in CME gold futures margins. Surprisingly the gold market hasn't been aggressively undermined by the potential Indian government efforts to discourage gold imports, but that bear story could become a dominating development going forward. Another element that might tend to favor the bears in gold today is continued adverse dollar market action. In fact, with a US Trade Balance report due out later this morning that in turn could dramatically increase the volatility in the dollar markets, which in turn could then impact the gold market.
Chinese shares were slightly higher overnight led by gains in auto company shares, which in turn were lifted because of favorable January sales news and by positive Chinese trade data. European and UK shares were lifted because of the favorable Chinese trade data, with the leadership coming from gains in financial and mining shares. US equities are up again today reaching the Dow 14000 area again.
GOLD CHART
The choppy and overlap pattern is not usually a bullish outcome and if we break below the 1660 area and that Red mini downtrend line it will increase the potential for gold to selloff. After failing to hold the 1680’s on three different occasions this week, the pressure will soon turn to the downside if we begin to make a new weekly low under 1660. The last two days held the 200 day moving average at 1664 and that’s where the funds usually buy. Thus if we break under 1660 we might begin to see some liquidation from them.
Resistance today is 1673-1677 at the upper red downtrend line and then 1681-1684 at the blue mini line. SUPPORT is the 1663-1667
In summary, until gold closes above the 1684 area the potential for it to sell off remains very possible. Choppy and overlapping patterns usually favor a resolve to the downside. Not always, but more often than not. With the Chinese New Year festivities next week it is disturbing that gold is not rallying. Caution is still the key word. We can still go either way --- but time is running out before the market decides to go visit under 1660 again.
Commitment of Traders Report
*The large specs increased their longs by 11,703 contracts and increased their shorts by 1,186 contracts.
*The commercials decreased their longs by 14,485 contracts and decreased their shorts by 6,975 contracts.
*The small specs decreased their longs by 2,730 contracts and increased their shorts by 277 contracts.
Of note was the large specs increased longs by a fair amount and the commercials dumping their long positions.
We await the resolution of the triangle pattern and expect that, as in August 2012, the wait will be worthwhile with a strong trending move once the triangle consolidation is resolved. The most difficult part of trading is the sitting and waiting, though we will be rewarded once the next move gets under way.
Next week is a holiday week in China, so physical demand will be subdued - as this has been a major supporting feature of the market recently, the absence of Chinese buyers increases the danger of a heavy sell off, as the usual "dip buyers" will be largely absent. Therefore, we need to be on alert for a price drop next week.
YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
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.
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
