Gold Commentary

Disclaimer: I'm not an analyst and I am wholly unqualified to give any financial or investment advice whatsoever. This is just a place for me to put my notes accessible from anywhere and for a few friends to discuss.
 
Last week was more volatile than I anticipated. Quite scary. What I'm seeing though is a lot of intraday volatility that's responding directly to the news. Friday was quite shocking (again) as the shorts came in, pushed things down and then left with almost no damage done at all. Gold was hovering with almost no volume at 1433 before the non-farm payroll figures. The figures were better than expected and a lot of comments from the fed were released (these are apparently pre-written btw!!!). The market took a dive (over 1%) and finally closed for the weekend at the upper side of 1428.

Fundamentals
I can't see that raising interest rates are going to negatively affect gold, all they're going to do is cause more havoc with what's already a fragile situation. The Eurozone is still in a mess, mortgage defaults jumped in the UK last week. Inflation is going higher. Japanese car sales were down nearly 40%! JPMorgan released a report saying as many as 20,000 middle/back office jobs will have to go. It was mentioned by one fed official that 200,000 new jobs (serfs) per month until the end of 2012 would still leave unemployment relatively high.

We're far from out of the bad news and the war of devaluing currencies continues. Maybe the Americans have run out of excuses to print money for the time being especially in light of the disasters in Japan and G7 support of the Yen.

Charts
So what do the charts say? Firstly the long term chart is showing a positive. The Dragon is still there! What it's showing is that the negative fluctuations were not sufficient to shift the pattern to the negative side in the long term. Indeed as the shorts unwound on Friday, we closed for business above the 1425 support line.

Previous long-term resistance at 1425

The long/intermediate chart shows more clearly the volatility that's going on, but there is clear consolidation above 1412.30, with a bubble to the upside. I think we can safely say now that any moves below 1405 are bad, my stops are in at 1402 and I'll consider shorting on margin to protect my physical below 1400. February's high saw a re-tracement of 50% of the move down into the 1380's. The backing off from March's high was arrested again and again at 1412.30. Of course we're still in a secular bull market in gold and what we're looking for is protection of the gold we've accumulated. At present we're safe, looking at some upside, but with 1400 being such a strong negative signal if it happens, we need to be alert.

Drop from March's high arrested again and again around 1412.30

1450/1460? Well I see these numbers being bandied around and to be honest those levels could be hit by accident if a few big players are not paying attention at the same time, I mean it's not really a balls-out call by those analysts.

Prospect as of April 2011
I think it's an interesting time. Things look slightly up here in Hong Kong, you can feel the buzz, but there's lots of bad news around. If Americans can challenge and overcome the people who block their constitutional powers to use Gold and Silver as money, then there might be some rising demand for gold, but on the other hand, if American can't and are forced against the constitution by the powers that be, then their impending loss of freedom might actually force the flight to gold higher (look at Egypt whose ban on gold is leading to massive price inflation and smuggling).

Anyhow we need to keep an eye on the feds actions as this could well lead to some bargains in gold, or worse case a flight to yield could cause an end to the bull market.