Gold futures (GCM8) and silver (xagusd) technical update

Gold is down trending and aiming to break support at first April low (876.5$ for GCM8). The price of gold failed to penetrate the 50% Fibonacci resistance at 957.54 and selling pressure pushed the price lower.

Resistance at diagonal upper trend line, ~906.5$ , ~938$ (38.2%Fibonacci) , ~976$ (61.8% Fibonacci) , ~1003$(76.4% Fibonacci) and the high of 1038$.


Support at 876.5$ ,~860, 850$ -840$ , ~820$, 792$, ~750$.


June Comex gold futures (GCM8) 8 hours chart



Gold spot weekly chart






Silver is down trending as well and already lost 5$ from its top at 21.33$ (spot price)


Silver Spot weekly chart

Short term technical update (GCM8)

The bulls had a few moments of grace as the price of gold managed to trade above the diagonal trend line resistance, but gold failed to penetrate the secondary top at ~960$ and pulled back ~50$.

resistance around ~938$ (38.2% fibo) , ~976$ (61.8% fibo) , ~1003$(76.4% fib) and the high of 1038$.

support at ~888$, 876.5$ 850$ -840$ , ~820$, 792$.

All price relating to Comex gold June contract (GCM8)

Gold price short term analysis

Dear readers ,


General observation: In the last several weeks some actions took place, all of them in order to stabilize systematical large size financial risks. Major central banks such as the US Federal Reserve(Fed) and the ECB are keeping a closer eye on the markets, apparently being more flexible and “creative”.

The above has probably a negative continues influence on the affinity to physical gold as an insurance – proof to major systematical financial risks.


Technical condition
Spot chart - gold dropped below the uptrend line which connect the August and December bottoms (2007) but managed to climb back, currently it closed right on that line.




Gold June future contract (GCM8) 8 hours chart - Topped at 1038$ , bottomed at 876$. resistance - so far the 38.2% fib (938$) - , 950$ -960$ (50%) . The downtrend linear channel is still encapsulating the minor uptrend so the bear force has the control on that time frame.

Gold chart & update

The climate: Continued stress of banks and other financial institutions. In my opinion the source of this stress is illiquidity of non trade able (unlisted at a public exchange) financial “products”.

Outlook: High volatility is present in all markets, extreme events in which investment banks remove huge amounts of liquidity while central banks creates huge amount of liquidity to fill the “holes”.

Technical:

Recent pullback was the biggest since August 2007 bottom, the spot price of gold came down ~128$ (905$) since it's top at 1033$. The spot price of silver dropped from it's top at ~21.35 to ~16.67$.

The trend line which connect the August and November bottoms is still intact. See the chart below for Fibonacci proportions and less steep trend lines. If the recent bottom zone at 905$ - 884$ will not hold then the price might retrace to about 790$ if not lower.

Later on and depending on the fundamental events which will be reflected on the charts – gold might move higher or maybe much higher then recent highs.

XAUUSD update

The price of gold advanced about 300$ in the last 6 month. If you multiply that by ~150,000 tons (estimation of total gold above ground - worldwide) then all of that is worth ~ 150,000{tons) x 30,000{average ounces in ton) x 1000(gold futures price estimation) = 4,500,000,000,000$. 4.5 Trillion.


What does it mean? Well… all the gold that people have ever mined is worth about:

100 times more then the capital of the richest man in the world.

10 times more then the market capital of gigantic Exxon Mobil Corp. (XOM)

…


Some significant amount of system risk is priced in, as well as liquidity / inflation expectations.

However, recent bearish trend in many equity markets is suggesting possible downside for gold as well- the liquidity factor.

Perception of system risk should possibly be reduced by needed co-operation of international regulators and primary national institutions.


Technically, Elliott wave pattern suggest a possible completion of sub wave but short term higher high is still possible (less likely). At this stage if a serious correction is underway then a 200$ + correction is not abnormal.

If you participate in the gold market then refer to mid 2006 and note the magnitude of the correction back then. Such scenario can easily occur again.


Gold is much more popular now then 2 years ago, that to me means that from a sentiment point of view gold is either fairly valued or maybe somewhat overvalued. Nevertheless, in coming years it is still possible and also likely that higher highs can be reached.