London Gold AM Fix $1,311.00 +$1.75 from previous PM
CME GROUP NEWS
Some weakness in the US dollar and "less" fear of tapering plus uncertainty over terror activity in the Middle East and Africa helped to provide the market with some underlying support. December gold managed to hold 1st good support at 1285.60 basis the December contract on Friday and managed a strong recovery to close near unchanged. For the week, October gold finished with a loss of $11.30. A stronger Dollar put gold on the defensive early on Friday as recent strength with US economic data was seen by many traders as helping to fuel near-term Fed tapering expectations. The catalyst for gold's sharp positive turnaround was the Non-Farm and Private Payroll numbers, which were below market forecasts and were widely felt to have diminished those Fed tapering expectations very quickly. A lack of fresh news from South African wage negotiations was felt by some traders as keeping further gold gains in check on Friday. Holdings in a major derivative fund fell 2.5 tones to 918.6 tones, their lowest since February 2009. Labor problems at South African mines could be a major bullish factor at some point but the short-term action is being driven by economic news. Comex Gold Stocks were 7.018 million ounces down 4,822. The Commitments of Traders reports as of July 30th showed Non-Commercial traders were net long 51,863 contracts, a decrease of 5,915 contracts and the long liquidation selling trend is seen as a short-term negative force. Late last year, this position was up near 240,000 contracts so the long liquidation trend has been significant. Non-Commercial and Nonreportable combined traders held a net long of 49,746 contracts, down 8,300 for the week.
Chinese shares finished the day with moderate gains, with the Shanghai A Share index posting a 1.04% gain. However, Japanese stocks started the week with a negative tone as the Nikkei finished with a 1.44% loss. European stock indices were generally posting moderate gains this morning before US stocks, although the Italian MIB index remains close to unchanged levels. US stock index futures have pulled back from their early highs and are slightly lower, while the Dollar is moderately lower this morning, but trying to rally back. A survey of Euro Zone Service Industries during July came in at 49.8, higher than market forecasts. Euro Zone Retail Sales during June were down 0.9% year-on-year, slightly better than expectations. Today's US economic data will include a survey of US non-Manufacturing industries.
While the markets keep telling us that weak economic data is good for gold, we at GoldTrends feel the opposite is the reality. WE NEED BORROWING AND ECONOMIC EXPANSION to get spending going again and to increase the velocity of money changing hands. That is what will fuel inflation and the metals. If weakness and fed bailouts were good for gold, we wouldn’t be down 600 bucks from the top. We need INFLATION not stagflation. Yes, there is manipulation going on, but if the market was really strong, they would not be able to stop the rise in price.
Gold Chart
The low off of the jobs report did not quite make it to the purple support line on Friday. Since the market has changed from August to December contracts, trend lines sometimes have to be adjusted at first a bit. So it’s possible that the support line needs to be tweaked a bit. It often happens at the start of a new front contract. But it’s also possible that gold could visit the 1272 area where important monthly support resides. The one important thing to note is that the April Crash low was 1322 and you’ll note that the green 200 hour moving average has turned down over the last few days and is sitting right now at 1322 and you can see that today’s highs so far is back to the 200 hour and at the moment, price is below the uptrend line. With short term cycles due to turn on Aug 6th (plus or minus 72 hours), it is possible that Friday’s low was it, but still possible for one more pullback this week. For now, resistance remains as noted last night at 1322 and support is in the 1295-1302 area. As long as we’re below the 1322 area it’s still possible to move lower towards 1272. A close above 1331-1333 would favor a move to the purple trend line near 1345. That line is from the October downtrend so it’s going to be important resistance. Once that line is breached, and we close above it, then odds will favor a higher price into the 20th of August. Until then, and as long as we remain below the lower white uptrend line, we can still pullback this week. So it’s key to first get above 1322-1333 to favor higher.
Cycles
The next short term cycle is due Aug 6th (plus or minus 72 hours). That means that Friday could have been the low but until we get above one of these trend lines, it’s still possible to drift lower. There are major long term cycles coming into play and they have made the short term cycles a lot more mixed than usual. Whenever we have blue cycle tops instead of red, it is always more risky to the downside. NOTE how often the RED cycle leads LOWER. However, when it’s on the bottom of price (like the last time) there is a move higher that can play out and often does, but it’s not as reliable. The one thing about lows on a red cycle and high on a blue cycle is that it warns that the MAIN TREND is not up. Thus we can rally on these cycles, but they are usually counter trend moves. Sometimes they last a while, sometimes not. The key is we need to see prices climb above the lower dotted trend line. That should prompt a test of 1350 again. Until then, all we have is a reversal bar from the jobs report. And while we may have a short term low, we need to see FOLLOW through.
Silver Chart
As in gold, it is possible that Silver made a low last Friday, but it is not a confirmed one. That big spike to 20.50 and rejection is not exactly a bullish omen. The key will be if silver can close above 20.20-20.50 as we’ve indicated for a bit now. When we look at the choppy and overlapping condition of the move it tends to favor a counter trend move, meaning that we could see one more low in silver. The only good thing was the PULLBACK since July 22nd was choppy and overlap on the downside and that at least gives potential that the short term cycle coming up on Aug 6th will give us some upside to Aug 20th. The bottom line is silver needs to close above that purple channel line and that lower white dotted line. Until then, it’s still possible to drift lower. As we’ve mentioned in the past at the website, July (and August) can give a lot of head fakes before the real move on the seasonal arrives. Support is the 1920-1950 area and resistance is the 20.20-20.40 area. Anything in between is a trade range. As you can see, a lot of moves down to 1950 have been bought during July. So closes below 1950 favor a move to the purple trend line again. IN SUMMARY, both gold and silver need to do short term work higher to confirm the short term cycle is taking effect and will move higher. At the moment, it can still go either way as the window for this cycle is open at the moment until 72 hours after Aug 6th. So it may have bottomed, but it may have one more downside surprise. While the window for the cycle sucks ---- the truth is if the cycle didn’t have a window, everyone would know the cycle exists and it would disappear. So it is something we have to live with. The last blue cycle peaked on the exact day on the 22nd. But they do not all do that --- they have a plus or minus 72 hours at each cycle.
