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Gold Market Analysis

At least in the early going today, it would seem like anxiety toward the Greek situation remains in place, but it has been moderated by somewhat up beat French and German Consumer confidence readings. It is also possible that many markets are becoming hopeful of an orderly Greek exit, as equities clawed out initial gains and gold was tracking higher this morning despite news of a poll that showed the extreme leftist party might have gained ground into the coming Greek elections. In other words, the market could have feared a political shift in Greece toward a leadership structure that won’t honor prior promises to the EU. For gold and other physical commodity prices to see a Greek exit as a positive, they have to think that the exit will not be a sustained disruptive event. Weakness in the Indian currency this week has probably undermined investment interest in gold in that country but that negative could be easily countervailed this morning by suggestions from the Russian Central bank that they planned to buy a “considerable” amount of gold for reserves this year. Unfortunately, the Russian central bank last year only bought 100 tons of gold for reserve and therefore the size of the Russian buy might be a question mark for the gold trade. However, hints of central bank gold buying aren’t usually discounted easily and with a stronger Euro initially today and marginally higher US equities early on, it would appear that the bull camp in gold does have the edge off outside market action. Gold might also see some minor support in prices off a reduction of gold futures margins overnight. If the reaction to US scheduled data yesterday is an effective guide, the bull camp will probably be pulling for some favorable news from the US consumer later this morning. Comex Gold Stocks were 11.002 million ounces up 96 ounces. A marginally higher trade in gold this morning is telling as gold could have been under pressure this morning in the wake of news that a Greek exit was becoming a little more likely in the wake of a poll that showed more gains by the extreme left party ahead of the June Greek election. However, even though the Euro is showing some strength this morning, we have to wonder if that action will be reversed and a measure of fear and concern will return ahead of the long US weekend. In fact, if the European market close comes and goes and there isn’t news of some fresh compromise between French and German leaders on the Euro bond/LTRO debate, it is possible that gold prices will slump back below the $1,550 level in the June gold contract into the close today. Down trend channel resistance is seen up at $1,578.80 and aggressive traders might look to sell early probes of that level this morning. A near term downside target in June gold is seen down at $1,541.

Technical Analysis

COMEX GOLD (JUN): Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1589.0. The next area of resistance is around 1573.6 and 1589.0, while 1st support hits today at 1547.0 and below there at 1535.7.

 

StockMarketNews Research Team

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