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-- Posted Monday, 13 July 2009 | Digg This Article | | Source: GoldSeek.com

Gold prices managed to find some support over the past four sessions around the $910 level on the charts, borrowing most of that support from the equity markets.   Since the beginning of June until yesterday, gold had lost 7.6%, while the S&P lost 7.0%.  During that same time frame, the U.S. dollar is up slightly less than 1.0%.  It is a safe assumption to conclude that currently, gold is linked to the outlook on economic growth.

Inflation simply is a non-factor at this time.  It will be well into 2010 before consumer activity picks up to the point that consumers are chasing up the price of goods as they don’t know what else to do with their dollars.  With unemployment to continue rising, the number of hours worked per week sagging, the economy must consolidate and become efficient at these levels of production. Excess inventory must be liquidated and even then, new demand for supplies must reach to levels beyond what factories can produce with their now reduced shifts.  Employers will seek to push for higher productivity levels out of one shift before committing to returning to two shifts.

Activity in the U.S. dollar, however, does not convey much confidence in returning to a ‘strong dollar’ stance.  Timothy Geithner may state he believes in the strong dollar, but the people with the ability to influence its strength or weakness, mainly Congress, appear less-than-knowledgeable that their proclivity to spend borrowed money is anchoring negative sentiment.  Just yesterday, the opposition party in Japan, which is leading in polls for the upcoming election, stated that Japan needs to diversify its reserves away from the U.S. and into the SDRs from the IMF.  Japan is the second largest foreign-holder of U.S. securities, with $686 billion.

Short-term bias in gold is positive, as the S&P closed above its 10-day moving average.  Gold managed to find its feet late through the session and did not break its 10-day moving average, closing right around chart-resistance at $920.   A close back above $930 would help change the technical picture but fundamentally, gold needs economic sentiment to improve again.  More earnings reports are released tomorrow, along with business inventory figures and the PPI, so there is an opportunity for better than expected numbers to help boost sentiment. 

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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-- Posted Monday, 13 July 2009 | Digg This Article | Source: GoldSeek.com

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