June Gold: Open= 891.3 High=910.4 Low=890.5 Last= 904.6 +12.1
Gold prices opened the day strong and finished up over $12.00 per ounce, at 891.3. A lower dollar helped keep gold lifted throughout the session. Talks of bankruptcy in the auto-sector shifted from GM to Chrysler today as the gulf between what the US government is asking secured lenders to give up for a stake in the company is apparently very wide.
The government, negotiating on behalf of Chrysler, has asked secured lenders to write off 78% of auto maker’s debt in exchange for a 5% equity stake. The secured lenders told the government yesterday that they were prepared to write off 38% of the debt owed to them in exchange for a 40% equity stake.
News leaked this afternoon that the government was preparing for a Chapter 11 bankruptcy within the week, as that is the deadline given to Chrysler to make arrangements with Fiat. Fiat, however, won’t step up until Chrysler sorts out its debt issue, and would like be just as happy to see the company enter bankruptcy anyway.
Other deflated news today was a rise in initial unemployment claims, rising 27,000 over last week to a seasonally adjusted 640,000. There was some hope last week that the spike lower in initial claims was more than just a holiday blip and perhaps the recession was near an end. Today’s figure puts that idea off for at least another two weeks. And with bankruptcy in the cards for GM and Chrysler in the next month, the nation could see more mass layoffs ahead.
The next few weeks could give gold bulls time to recover some momentum as shorts cover their positions ahead of the stress-test announcement. If conditions in the banking sector are far worse than expected on May 4th, then fear and uncertainty could begin to return and that is exactly what gold bulls need. If deflation trumps inflation, as currently seen in the CPI and PPI, then the two cards bulls need to pull right now is fear or a bearish trend in the US dollar. Gold prices closed above $900 today, regaining some positive momentum. The next overhead resistance level is $916, which would be a test of the downward sloping trend-line.
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. A quasi double bottom could be in the works on the chart, however, with the two bottoms sitting around $865. It is possible that this has been a two-wave correction. Two closes above $916 would confirm a break of the downward trend. Gold bulls should have their interest piqued.
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.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact us at info@altavest.com. Visit www.altavest.com to request a Free Trading Kit. Keep in mind that there is risk of loss in all trading.
