A noted range up extension and definitive upside breakout on the charts in August gold this morning would seem to confirm renewed bullish interest in gold. The gold market seems to be drafting most of its current strength off anticipation of easing from the ECB and with that decision due in early this morning at 6:45 central standard time, one could suggest that gold is already pricing in at least a portion of an easing move. Technical traders are also suggesting August gold, with the overnight move, has broken out above a somewhat critical longer down trend channel resistance line on the charts and it has recently climbed above a 50 day moving average and some might suggest that it is seemingly working its way up toward the 100 day moving average up at the $1,669 level. Somewhat supportive currency market action might also be contributing to the upward track in gold prices and there is also talk that the US Fed is considering some easing action and that development could add to the bulls existing case. Dampening the upward track in gold prices this morning is a downward revision in a European GDP reading, reports of increased Asian scrap gold sales and talk of ongoing sluggish Asian physical demand. In the end, the gold market wants and needs to see one or perhaps two additional central bank easing moves to leave the bull camp happy. Comex Gold Stocks were 11.007 million ounces up 11,864 ounces. As we suggested earlier in the week, the August gold contract appears to be poised to return to the $1,650 level, but seeing an ECB easing move, combined with actual anticipation of action from the US Fed later on could launch August gold prices all the way up to the early May high around $1,674.30. Critical support in August gold moves up to $1,632 and by the end of the session, support might move up to the $1,641.30 level. While coordinated easing action will produce a noted extension of the current rally, for gold to remain in an upward trend pattern (and in turn toss aside a 4 month old down trend pattern) probably requires some action from the EU, which seems to tamp down the escalating debt concerns toward Spain. In other words, the EU has to come forth with a fresh move like the LTRO, it needs to agree to 3rd party budget control program by troubled members and or perhaps it needs to see an operation twist in the US which involves mortgage backed securities.
COMEX GOLD (JUN): The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1627.6. The next area of resistance is around 1622.7 and 1627.6, while 1st support hits today at 1612.9 and below there at 1608.0.
StockMarketNews Research Team