There’s a lot to be looked at and understood going into the summer.

First, it is not uncommon for gold to just drift around for June and July. I’m fully aware that this is not a typical trading year and the US economy for lack of a better word….stinks. With QE2 ending at the end of June, it’s unclear at this time if the Fed will embark on another stimulus program or not. If they don’t and the Dollar responds by breaking down, that could be bullish for gold.

OPEC held a short meeting today where Iran and Venezuela won the day as they prevented any formal hike in crude oil output for at least the next three months. It amazes me how each US presidential candidate promises to make America energy independent and when they take office, fail to do anything about it. Obama included. We knew about Bush and Cheney but President Obama seems hog tied.

So what happens after the June-July period? Studies I am reading point to higher prices. Price movement that has historically resulted by year in with gains. The key word here is “often”, since there are now guarantees as seen by what occurred in 2008. Past performance is not necessarily an indicator of future performance. It is but a tool traders should use in their trading arsenal.

Let’s take a look at the June-July time frame charts as provided by and used with the permission of USAGOLD (www.usagold.com)                                                                                           

Except for 2008, gold has displayed a strong seasonal tendency to move higher after the June-July time frame. It’s unimportant to me why it didn’t rally in 2008 since there’s “always” some event that can alter the norm of things.

I don’t see anything abnormal going on right now that should impact the “norm”. The markets already know about the US hitting its debt ceiling, sovereign debt issues in Europe, war in Libya, Yemen being out of control, Iran, Venezuela and Saudi Arabia splitting on oil output issues and so on. In other words while there can always be an unknown force coming into play, the above plays are known.  

Below is a Daily Chart of the June Gold contract.

Each individual “green” bar on the chart represents one day’s trading session, except the last bar which represents trading through the time I captured the image.

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 Swingline Study is shown as a “brown” line.

The Slow Stochastic Study is displayed on the bottom graph between dashed lines of 80 and 20.

The Swingline Study, displayed as a brown line on the above chart, is what I use to define what a trend is. You can find out much more about this in my Charting Course and you can activate this study in the Subscription area of my IraChart Software.

An Uptrend is made up in large part of higher highs and higher lows.

A Downtrend is comprised of lower highs and lower lows.

I’ve circled the highs of the Swingline in black and the lows in red. The current Swingline Study pattern is currently one of higher highs and higher lows while trading over the 18-Day Moving Average of Closing Prices. This is bullish.

The Slow Stochastic reading on the bottom of the Daily August Gold Chart remains embedded, which means both the red and brown lines are trading over 80. This is bullish. When the K and D lines that comprise the study stay over an 80 reading for a set number of day, it means the study has moved from being overbought, to “locking in” the trend.  Should the K line, the red line of the Slow Stochastic Study turn down under 80, the odds would favor a return to support at the 18-Day Moving Average of Closes, which is currently at 1521.2. If 1520.4 were to be taken out a new chart picture would unfold since the pattern of higher highs and higher lows would be broken. A trading range with some temporary downside bias would then be what I would expect to develop.

Unless and until that occurs don’t get ahead of yourself. Remain bullish.

Gold is not being supported today by the surge in oil prices. This is interesting. It’s also interesting to see the Dollar spike higher while T-Bond and T-Note futures are rallying at the expense of the Eurocurrency falling nearly 100 points.

Having been a broker for decades, I have found it human nature to not prepare. Right or wrong, the past ten years show a strong tendency to begin a mover higher into year-end starting at the end of July.

The next few weeks are where you should prepare to execute a game plan. I already have one and my brokers and I are now in the process of working out the details of using futures and options to take advantage of the upcoming seasonal play, should it develop.

If you haven’t yet opened an account with us, you might want to use this time to do so.

If you have an account, be sure its adequately funded.

There’s going to be a point where I say…GO. It’s not far away.

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-- Posted Wednesday, 8 June 2011 | Digg This Article