June Gold: Open= 905.5 High=915.4 Low=904.2 Last= 913.7 +7.1
The nearly two-month long correction in gold prices may be nearing a turning point. A two-wave correction apparently has formed on the charts, culminating with a small double-bottom formation at the $865 level. The next overhead resistance level is $916, which would be a test of the downward sloping trend-line.
Prices ended the week sitting around $914 an ounce, which sets up a test of the trend-line next week. Bulls will be looking for two consecutive closes above that trend-line to help regain technical momentum. What is needed however is a continuation of fundamental support, and for that, the uncertainty surrounding the government stress-tests of the nation’s nineteen largest banks has helped fuel a $50 rise in gold process this past week.
Also helping bulls is the destabilizing talks of bankruptcy surrounding Chrysler and GM. The US dollar has materially weakened this week and appears headed towards a possible re-test of the March lows. Demand for physical gold from China is heating up, as the nation already has expressed desires to increase its gold holdings from around 1,000 tons to 5,000 tons. Is it any wonder why China has urged the IMF to sell all of its gold holdings?
Though the next downside target for gold is between $860 and $820, the quasi double bottom around $865 should have the interest of gold bugs piqued. It is possible that this has been a two-wave correction. Two closes above $916 would confirm a break of the downward trend.
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