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-- Posted Thursday, 25 June 2009 | | Source: GoldSeek.com
Seasonal Story The chart below was supplied by The Moore Research Institute.
The Seasonal Gold Chart above displays gold price movement in two ways. It goes back 15-years to get a more current average of prices and back 35-years showing a longer averaged time frame. Historically speaking, prices trends are fairly erratic in summer months. It’s at the end of summer that uptrends often grab hold. That having been said, gold’s tendency is not to get strong now. It does so often at the end of summer. Fed Holds Rates for “Extended Period of Time” The FOMC Meeting and accompanying Fed Statement has come and gone. The Fed said it is going ahead with the agency purchase of Treasury instruments it has committed to and that for the foreseeable future it sees the need to hold interest rates steady. It did not commit to buying more instruments than it already has announced. There were no surprises in the Fed Statement. US Dollar The US Dollar seems right now to be floundering. It’s simply whipsawing around, caught in a trading range of 81.90 and 78.83. Over the past 5-days there have been two false breakouts in the Dollar, one to the downside and the other to the upside. Neither have been able to follow through. The Swiss National Bank intervened yesterday to drive down the value of the Swiss Franc. Intervention in and of itself at best cushions trends, it rarely changes them. However, intervention does imply trend interference, which puts traders on notice. Iran Iran’s election did not have the desired result many had hoped for, at least on the surface. Behind the scenes I think many are jumping for joy. Given Iran’s internal problems, it’s likely that the Iranian Government will have to turn its attention inward. As such, the mischief they cause influencing outside groups that threaten other Arab states will most likely take a back seat. More funds will most assuredly be spent on tightening down the government’s grip on its populace. This leaves less to be spent supporting renegade groups. Iran’s influence has been tested. They have lost face in many parts of the world but don’t expect the US or other Western Nations to do much more than complain about what is going on. My take on things is that the Iranians that are rebelling are not yet strong enough to overthrow the ruling government or clerics. If the market thought more than I do, I would assume it would have shown up in more of a rally in gold’s price. It hasn’t. Since it hasn’t, this prop for gold prices is at least for the being, neutralized. Couple this with an ongoing stabilizing of world economies, a summer time mentality and lack of inflationary readings and further props to higher gold prices at this time are simply not there. Eventually inflation will become a serious issue, but not today. China China has recently made it known that it is interested in accumulating more gold reserves. This most likely means less buying by China of US debt instruments. Again, this news is in the market and prices aren’t rising appreciably. Daily Chart Last week I wrote that I expected to see a small upward price correction take place. Not one that will have much upside to it. I went on to say that I thought the upcoming rally would setup another short sale opportunity. I still do. Let’s take a look at a Daily Chart of August Gold to see why. 
Let’s start out by looking at the Stochastic Study on the bottom of the chart. Stochastics are made up of two lines. A “K” and a “D” line. The “k” line is displayed as the red line, “D” line as the yellow line. The lines are set between an axis reading of 20 up to 80. The Stochastic formula is set to have the red line whip around the yellow line. When both lines are under 20 or over 80, they are “embedded”. As long as they stay embedded, in theory at least the trend should be bearish. This ends when the red line closes over 20. The red line came out of its embedded status yesterday. When this occurs prices often move up to challenge the 18-Day Moving Average of Closes. This average is shown on as a red line on the graph above the Stochastic Study. The value of the 18-Day Moving Average of Closes as of this writing is $946.90. Now let’s look at price retracements using a Fibonacci Study. These retracements are the white dashed lines on the chart. I have labeled in aqua the most recent high and the most recent low. The three dashed center lines represent retracement levels. Since these levels are above where prices are currently trading, these dashed lines represent resistance levels. Couple this with the 18-Day Moving Average of Closes and my guess is that the $940-$950 price level is where gold is trying to head and where it will run into resistance. Conclusion and Reccomendation As you can see on the chart, gold yesterday broke through the previous week’s high. Stochastics also lost their embedded status on Wednesday. Therefore I look for a rally. Not a large one, but one that can test the 18-Day Moving Average of Closes. Once that number is tested, I look for prices to run out of upside momentum. If I am right, after that the most recent low of $913 will be tested. That test, depending on when or if it occurs will in my opinion determine the next leg gold prices take. At this time now trade bias is neutral. I am no longer as bearish as I have been over the past two weeks ago. However, my bias for the summer is still bearish and I am looking for a new setup on the charts to once again get short. That time is not here, so be patient. Research We offer a vast array of FREE Market Research to our customers. We provide access to Market Research throughout the day both via e-mail and through our trading platforms. Our information covers in depth: METALS: gold, silver, copper, platinum, palladium STOCK INDICES: s&p 500, dow jones, nasdaq, russell 2000 GRAIN: corn, wheat, canola, rice and the soybean complex MEATS: live and feeder cattle, live hogs, pork bellies SOFTS: sugar, cocoa, orange juice, cotton, coffee and just about every other futures market covered. Call us to receive your copy of the recently updated 2009 Linn Group Commodity Markets Outlook, that covers with graphs and verbiage an in-depth analysis of what The Linn Group thinks many markets will do in 2009. Updates to this are sent out a few times a year as well. Let us set you up with a FREE Trial to our information. Just call 1-866-973-2077. Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Thursday, 25 June 2009 | Digg This Article | Source: GoldSeek.com
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