-- Posted Friday, 17 April 2009 | Digg This Article
| Source: GoldSeek.com
June Gold: Open= 876.9 High=877.9 Low=865.6 Last= 867.9 -11.9
The price of gold fell $11.9 dollars today, following yesterday’s $17 slide in the face of three consecutive days of trying to move above $893.0. It appears bulls simply lost momentum and the gold market lost ground throughout the day as the stock markets strengthened. The US dollar surged higher against all the major currencies and appears to have broken out of a consolidation triangle or is the process of testing the resistance on a quasi-ascending triangle. Either way, it appears that the least resistance for the dollar is higher.
On the economic front, the trend of better than expected first quarter earnings reports continued, both GE and Citigroup showing better than expected results. There is on-going concern about credit card defaults that are still plaguing banks but the market seems to be happy that overall losses are smaller than expected. Some hand-wringing is bound to increase as May 4th approaches, which is the day the government begins releasing the bank stress-test results. The interesting note here is that the banks regularly undergo such tests but those results are bound by law to remain secret.
Moving back to gold, the bias is still towards the downside. The US dollar appears to be in favor at the moment, deflation is the reading coming from the latest CPI and PPI figures, and it appears that, at least for short term, as bad as this recession is, the economy is not the next coming of the Great Depression.
It is important to note that the Japanese ‘Lost Generation’ was a decades worth of sub-standard growth and huge amounts of debt. It wasn’t a recession that lasted a decade, the economy just simply didn’t take off like a rocket (as Keynesian theory would suggest) and thus the country was saddled with massive debt to pay off at a very slow pace.
How an economic recovery will play out is simply an unknown. Many people are hedging that inflation is around the corner, but the current data does not give support to that thought at the moment. Until that bears out, fewer and fewer traders are willing to step in and buy at these levels. The jury is ‘out’ and that is causing short sellers to even test the waters.
The short term trend is clearly down, but the overall trend is technically still higher until the market breaks the $814 price level, which sits around the 61.8% Fibonacci retracement level. Given the uncertain economic direction and the uneven performance in gold, buyers ought to be patient and wait for some type of bottoming action to develop or buy when the pattern of lower highs is broken.
The next downside target for gold is near $860, which would be a 50% pullback. A retracement to the 61.8 Fibonacci level would be to the $820 level. Resistance is found at $890, $895, and $914.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
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Thomas Hartmann
Altavest Worldwide Trading, Inc.
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-- Posted Friday, 17 April 2009 | Digg This Article | Source: GoldSeek.com
