In last week’s Metal Report I surmised that gold had entered a trading range boarded by $1131.50 down to $1061.5. I laid out technical reasons for arguing that gold was at a point where it could go either way and pointed out that $1100 had become the pivot from which the market would decide on which way to go.
Since my last report we’ve seen a major earthquake take place in Chile, one of the world’s largest copper producers. The earthquake event triggered sharply higher copper prices which in turn pulled silver prices higher with it as silver is known to be a by-product of copper ore. The rally in these two metals helped to anchor gold prices.
As this took place, Greece’s debt issues made headlines along with those of the UK. The Dollar rallied until Greece announced today its new austerity plan. Specifically, Deputy Citizen Protection Minister Spyros Vougias was reported by Bloomberg as saying the Greek government took additional austerity measures to meet its deficit-cutting pledge this year. The measures were reportedly agreed to at a cabinet meeting on Wednesday totaling 4.8 billion Euros ($6.5 billion). The Greek Government indicated it will also lower spending by an additional 2.4 billion Euros and raise an extra 2.4 billion Euros in revenue. The measures include cutting civil servants' bonus-salary payments by 30%, freezing pensions and raising the value-added tax to 21% from 19% according to the report. How the Greek public reacts to this remains to be seen.
At the same time, how Germany and France react to Greece’s plan is important. Is the Greek plan enough for Germany and France to act as guarantors of Greek debt? With this plan will Greece be able sell its debt at a reasonable interest in the open market? Will Greece be able to get the same terms for loans as other EU members? Will Greece have to turn to the IMF for a loan? These and other questions should soon be answered. The answers are will go a long way in determining the impact on other EU members that also have sovereign debt issues.
No matter how the Greek issue is resolved, behind it are Spain’s issues and how the UK election goes. My point is that there’s lot of reasons for investors to want to own gold, given all the uncertainty surrounding the EU and the UK.
The Seasonal Gold Chart shown above was provided and created by the Moore Research Center, Inc.
The top part of the graph contains three lines. The magenta line represents the most recent 30-year pattern. The black line represents the most recent 15-year pattern. The red line represents the most recent 5-year pattern.
The bottom of the graph contains a representation of what gold prices have looked like in prior Bull and Bear Market scenarios, dating back to 1973. The ‘key” is to mix the current short term chart pattern with that of longer term chart patters to develop an idea of which pattern gold is following.
The path gold takes in March is very important. In Bear Pattern Years the month of March has not typically been friendly to gold bulls. If March ends up with a pattern similar to that of Bull Pattern Years, it would go a long way in encouraging technicians about the probability of gold seeing even higher prices in 2010. Possibly all time highs. In other words, I think how the month of March ends up in terms of gold prices gaining or losing value will be very important to gold prices later in 2010.
Here’s some simplistic analysis of the daily chart.
The Swingline Study displayed as the black line now has a pattern of a “higher high” and a “lower low”. Current price action has driven the market through the last high of 1131.5. At the same time, the most recent low of 1088.8 is lower than it previous low. This creates a pattern of a higher high and a lower low.
Prices are currently trading over the 18-Day Moving Average of Closes, 1104.1, which I view as a bullish factor.
I would like to see the Swingline Study develop a pattern of higher highs and higher lows, not one of having a lower low. This could occur if a downside correction were to take place that does not result in 1088.1 being broken.
Below is a Weekly Gold Chart. Each individual bar on the chart represents one week of trading. In “red” I have plotted the 18-Week Moving Average of Closes and in “black”, the Swingline Study.
Let’s review this chart.
1. The market is trading now trading over the 18-Week Moving Average of Closes. That is bullish.
2. The Swingline Study’s current pattern is that of higher highs and higher lows. That is bullish.
3. A price move under 1061.6 would turn the weekly trend down.
I think gold is at an important place in terms of time. Price momentum has an upside bias.
Daily news stories have a bullish tone to them for gold.
I expect to see support against the 18-Period of Moving Average of Closing prices in both the Weekly and Daily Charts.
The key to keeping up with my trade recommendations is through my Twice Daily Updates and my oral updates.
This Weekly Metal Report is designed to provide you with my current “take” on the gold market. However, what happens when my ideas change before I write my next report? That’s where my Daily Updates come into play.
Futures Trading Kit and Twice Daily Updates
Important Notice…
For the past couple of months a number of our customers have been testing out a new phone service where Ira Epstein orally records his trade recommendations and market commentary. Our phone service next calls your phone within moments Ira finishing his recording. The updates are short with specific trade recommendations first and commentary second. The feedback has been fantastic.
If you are not already receiving Ira’s oral updates, you can easily be added to our phone list by calling us at 1 866-973-2077.
In additions we have a Futures Trading Kit that can easily be downloaded.
The Kit contains access to:
Live Chart Data, Charts, Quotes, Technical Chart Studies, Videos that talk about trading techniques, money management tools, access to our Daily Market Research along with our proprietary electronic trading booklets and much more.
Best of all, all this is FREE to experience
Simply call to receive your of our Futures Trading Kit.
It’s your FREE Trial to our market information and other trading tools.
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. Chart data is courtesy of LGP-IraCharts. 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 not indicative of future performance.
