-- Posted Thursday, 10 June 2010 | | Source: GoldSeek.com
My last Gold Report, written nearly two weeks ago on May 27th, made mention of gold entering a trading range. In that report I said, “From a chart perspective, gold seems be caught in an $83 trading range. The trading range’s high of 1251.4 was made on May 14th. The low of the range was made 6 trading days later at 1168.” Not a lot has changed since. Yes, August Gold did make a new contract high of 1254.5, but it’s currently trading back down to the 1225 price level.
In terms of world events, gold continues to be fed bullish news. New sanctions were put on Iran by the UN Security Council yesterday. Britain’s debt rating has come under scrutiny by a major rating service. China’s exports were reported yesterday to have been sharply higher than market estimates. One group of Chinese officials made a statement that the gold market “too small to garner investment allocation from the Chinese currency fund” while at the same time another group in China noted the increase in gold reserves held by the People’s Bank of China. Seems the two groups have a different point of view. Spain saw a favorable auction overnight.
There is discussion taking place in financial markets about what would happen to oil prices if British Petroleum were to be broken up or go bankrupt due to the financial and government strain being put on BP by the Gulf of Mexico oil spill. Some think oil prices would rise. Assuming this analysis were correct, gold might be dragged higher. Keep in mind that higher oil prices would not benefit fragile economies and that Saudi Arabia this week through its oil minister suggested a $65-$75 trading range seemed appropriate
The point here is that I don’t see anything yet on the horizon that would call for a top in gold. Price corrections look to be buying opportunities in terms of the fundamentals. The chart action however remains overbought.
Below is a Daily Chart of June Gold. Each individual bar on the chart represents one day of trading. In “red” I have plotted the 18-Day Moving Average of Closing Prices, in “dark blue” the Swingline Study and the “black dashed line” is the Bollinger Band Study.
The dark blue line, the Swingline Study is displaying a pattern of a higher high and a lower low. The higher high is represented by 1254.5 and the lower low is 1198.1. Because the latest action to take place was that of making the higher high, the Swingline Study is said to be pointing up.
Prices are currently trading over the 18-Day Moving Average of Closing Prices. That is bullish
The Slow Stochastic Study (SSTO) is correcting its overbought reading. A reading of over 70 is considered overbought when either K or D lines, the two lines that make up the Stochastic reading are over 70 but not in unison over 80. I won’t take much in further downside price action to get the SSTO to get both numbers back under 70 which would aleve this study of its overbought reading.
In plain English, support looks to come in at 1214.6, the 18-Day Moving Average of Closes. If prices get to this price and the Slow Stochastic Study is not overbought, this looks to be the zone to try a long position from.
Gold has once again made all time highs in terms of Dollar, Eurocurrency and a number of other currencies. Inflation is not the driving force behind the drive in higher prices. This time around it’s gold’s quasi currency status that is the driving force.
As the Eurocurrency is “catching a bid” and rallying today, gold is slipping down. This makes sense given that gold’s current moves have had a lot to do with investor’s appetite or lack of appetite for risk. When sovereign debt issues make splashing headlines, the Eurocurrency comes under pressure, providing gold with a bid. As the Eurocurrency issues takes a back seat, gold is settling back down. Not breaking very hard, but setting back.
Support at this time looks to come in against the 18-Day Moving Average of Closes. Traders might consider buying long against 1214.8 with stop under the most recent Swingline Low of 1198.1. Mini contracts could be a way to go. Another way to play gold might be through a Call Spread which lessens the amount of cash outlay you have to put up and limits the Dollar risk to the price you pay for the spread. Call us to find out which spreads we’re recommending.
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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.
-- Posted Thursday, 10 June 2010 | Digg This Article
| Source: GoldSeek.com
