Intermediate Term=Bearish –need a close above 1465 to return neutral.
Short Term=bearish– resistance 1440-1450 -- trading range broken to downside --A close above 1440 goes neutral -- next support 1350-1360 and 1375-1385
Support and Resistance
(NOTE JUNE GOLD NUMBERS)
Initial Resistance 1401-1411 and 2nd tier 1419-1425
Initial Support 1377-1387 and 2nd tier 1350-1358
CME GROUP GOLD CLOSING RECAP
While gold saw a significant jump in physical gold demand in the wake of the sharp April slide, the question for the market now is whether or not demand will surface in the wake of a May washout in prices?
Not surprisingly gold was undermined by a significant upside breakout in the Dollar, but gold also seemed to be catching a fresh deflationary whiff from broad based commodity price weakness, a pretty significant negative PPI result from the US and lastly because of contraction in both US Industrial Production and Capacity Utilization readings. Some traders fear renewed gold derivative liquidation again and others see the failure to hold above $1,400 in the nearby gold futures contract as a very damaging combination. In the end, the trade will be watching the overnight reaction to the recent slide in gold prices in both China and India.
We discussed that the odds were coming less and less that we were going to hold that area and noted that Wednesday would most likely resolve. The resolve came with the breakdown and has reached the 1385 area where the 23% retrace line from the April low resides. Thursday's bounce resistance should be the 1403-1411 area. There's usually a consolidation after a sell off and so most likely a trade range day with a lot of activity near the 1390-1400 area on Thursday. it takes a close above 1425 to neutralize the downtrend. A close above that area would potentially be a short term reversal. Support is the 1375-1385 area and then the 1350-1357 area should the sell off continue. That's not the odds however, as they call for a bounce and attempt to see what 1400 looks like.
In summary, the break of the trading range flipped the short term back to bearish and that 1425 area is now an important resistance point. A bounce to 1403-1411 area is the most likely area price will encounter resistance for Thursday and 1st support is 1375-1385. Odds favor a trading range day.
What Next?
While we favored a new low for the week, we didn't think it would escalate below 1400. But once we lost 1415 it got to our next support level in a matter or hours. It was a disappointment that the short term cycle didn't play out, but on the trade side, things were too iffy to be long on trades and at least no loss was incurred.
The exodus of the hot money in gold has left the control boyz with a lot more power and they once again flexed their muscles.
Thursday favors a consolidation as gold tries to stabilize. As stated last night as long as were below 1440, gold remains on the ropes. That number comes down to 1425 now. Support is 1375-1385 and then 1350-1360.
The medium term going into June 21st still favors gold to be higher. It will be key for physical markets remaining brisk as that is the only thing right now that has a chance of supporting price.
