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Gold Market Analysis

While June gold managed a minor new high for the move overnight, the market wasn’t able to hold that initial probe higher. Gold was probably lifted by hints of support for the Chinese economy from the Chinese leader overnight and it is also likely that gold saw some lift from the Fed’s Lockhart who suggested that sustained monetary accommodation was still warranted. Lockhart also suggested that the dominating risk to the US economy was from spillover from Europe. With the World Gold Council last week seemingly fashioning quarterly supply and demand figures into a suspect bullish condition, the direction of the Chinese economy should become a key determinant for gold prices in the near term. In fact, evidence of slowing in the Indian economy and slumping Indian gold demand is thought to more than offset the anticipated rise in Chinese demand ahead especially if the Chinese economy shows any further slowing. All things considered, the bull camp has to be somewhat discouraged by the lack of upside action in gold prices this morning in the face of supportive dialogue from the Chinese leader and from a member of the US Fed. In fact, seeing gold prices waffle around both sides of unchanged this morning, in the face of supportive currency and US equity market action, would also seem to suggest that a portion of the gold trade just isn’t overly interested in the bull case. Comex Gold Stocks were 11.001 million ounces down 32 ounces. The Commitments of Traders Futures and Options report as of May 15th for Gold showed Non-Commercial traders were net long 103,824 contracts, a decrease of 17,155 contracts. The Commercial traders were net short 130,952 contracts, a decrease of 20,244 contracts. The Non-reportable traders were net long 27,128 contracts, a decrease of 3,089 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 130,952 contracts. This represents a decrease of 20,244 contracts in the net long position held by these traders. While the non commercial and non reportable net long position in gold was pegged at 130,952 contracts in the last COT report, June gold did see an additional $31 an ounce slide to last week’s lows, from where the COT readings were measured and therefore the net long readings might have seen even more liquidation before gold prices recovered late last week. The gold market has seemingly underperformed relative to platinum and copper prices this morning. In fact, with mostly supportive outside market conditions, one might have expected June gold to have forged a rise above $1,600 this morning but instead the gold market saw fresh buying dry up as the trade focus shifted from Asia to Europe. Initial support in June gold is seen down at $1,585.80 and then not until the $1,578 level. In the early action resistance should sit just above the market at $1,594. In order to throw off the 3 month old down trend pattern might require a rise back above a down trend channel resistance line up at $1,632.50, but that trend line resistance falls to $1,629 on Tuesday.

Technical Analysis

COMEX GOLD (JUN): The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The close above the 9-day moving average is a positive short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next upside objective is 1616.7. The next area of resistance is around 1606.3 and 1616.7, while 1st support hits today at 1576.7 and below there at 1557.4.

 

StockMarketNews Research Team

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