Japan. The Middle East. North Africa.

What more can I say. Think of the amount of both the natural and manmade events that have taken place in a two week period.

Libyan leader Gadhafi was thought to be close to being driven out of power two weeks ago. Today he looks stronger than at any point in the past two weeks as his army gains back control of the country’s oil assets. So, there has been nothing done to impose a no-fly zone in Libya. Even if one should be announced, it’s so late in the game that the momentum the rebels had has been lost.

Saudi Arabia weathered the first wave of protests last week very well. One more is protest is scheduled and there’s no reason to think it won’t result in the same outcome. Bahrain has serious issues with its protestors. At the request of Bahrain’s monarchy, Saudi Arabia was asked to send in 1000 of its army personnel to quell protestors in Bahrain. Think of this as a dress rehearsal if protests get out of hand in Saudi Arabia. How this is controlled is very important.

Japan is reeling from massive earthquake destruction and is dealing with a nuclear disaster. The scale of infrastructure damage and human tragedy is heartbreaking.

Last night the Yen has surged to a high not seen since the mid 1990’s. The Swiss Franc is at an all-time high against the Dollar.

What has gold done during all this turmoil?

Well, it’s broken in price. Yep, the traditional idea that gold was the safe refuge is not at work in the current market scenario.

What has become a "safe haven" are the Swiss Franc and US Bonds and Notes. Bonds are notes are probably rallying a bit too much due to Japanese selling of them as Japan holders, one of the largest owners of US debt, is probably liquidating the instruments they hold to repatriate funds.

Given that this world scenario has not resulted in gold going higher, my guess is that gold will need another type of event to move higher. Most likely it will be inflation when the Japanese disaster gets behind us and Japan, China and other developed countries see economic rebound. I expect that to be some time in late spring, early summer, which ties in with the chart below.

Below is a Seasonal Chart of Gold prices produced and provided by Moore Research Center, Inc., (www.mrci.com). I’ve been writing about gold’s historical tendencies for a long time.

For those of you that wish to learn more about seasonal historical studies, visit the Moore Research Center and sign up for their 14-day free trial.

Seasonally speaking, March is not a month where an uptrend in gold prices typically takes place. I realize that history does not predict the future and that world events are such that this year has all the makings to create an exception to the rule. However, I can’t get away from being very disappointed in gold prices not surging forward during all this chaos.

Below is a Daily Chart of the April Gold contract.

Each individual bar on the chart represents one day of trading.

The Swingline Study on the daily chart remains bearish, with a pattern of "lower highs and lower lows".

This Gold Report is very different from my last one. In my last report I said, "I know how unpopular it’s going to be to say this, but I would not recommend buying into the Bollinger Band Top." That was in my March 2, 2011 report.

Now I am saying don’t’ sell short into the Bollinger Band Bottom.

Let me repeat what I wrote in my last report. "Markets can and do trade against BB Tops and Bottoms. This is not unusual. However you have to understand that you are doing so at an "extreme" and that at any point a return to the 18-Day Moving Average of Closes can occur. This (the red line on the above chart) is where the market can do what I call a "reset"."

"When prices are over this indicator I teach to look for potential Buy Signals. When under this number I teach to look for potential Sell Signals. It is my "line in the sand number". A major filter I use in chart analysis."

Nothing has changed.

Gold was overbought in my last report is now oversold. If prices get over the Bollinger Band Top of 1406.6, a rally up to 1416.2, it would be of no surprise. However, there is nothing even if that event occurred that would be bullish on the chart below. Gold is oversold and some short covering or bottom picking rallies are likely. However as long as prices remain under the 18-Day Moving Average of Closing Prices, I will continue to look for selling patterns.

I see key support coming in at the 18-Week Moving Average of Closing Prices, currently displayed as 1380.1. Clearly the Daily and Weekly Charts are not in synch with each other, as the Weekly Chart is still in an uptrend and the Daily Chart is in a downtrend.

The Daily Chart however is oversold and the 1387.7 level is where support at the Bollinger Band Bottom comes in.

Until prices get back under 1307.7 on the Weekly Chart, the longer term trend remains as it did in my report two weeks ago; overbought, but up. The difference now is that prices are knocking on longer term support; this charts 18-Week Moving Average of Weekly Closes.

Gold has not acted as a safe haven refuge for investors of gold as the Japanese disaster unfolds. Given that Japan is in the news 24/7 right now, I don’t expect this to soon change.

Those bearish have the upper hand for the time being. I would expect this to last until the nuclear event comes to an end and rebuilding to Japan begins. Once that occurs, traders will look at the amount of stimulus needed to rebuild what has been lost, where China’s economic growth is, how US employment is running and so on.

Major stock indices as a group have lost most to the gains for 2011. Gold is still holding onto overall gains.

I see resistance near 1416 and support near 1380. I would treat gold as a trading affair market with downside bias in the near term.

Specific recommendations are given in my Twice Daily Updates. Read more about them below.

http://iraepstein.linngroup.com/delayed-trade-recommendation2/oral-update-service.html

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.