For the gold price, two outcomes are possible.

For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?
You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad economic news out of China appeared to be the catalyst for gold's drop today.

But when the drop is ready, the cause appears. That fall was likely already in the market, and the report, plus jitters over the first anniversary of the April Massacre in gold and silver last year, furnished an excuse. I had been thinking that the gold price had possibly completed a three leg (A-B-C) correction, but clearly another leg remains. That began today.


Ukraine Crisis Send Gold Price Move Higher

Heightened geopolitical tensions surrounding Ukraine, combined with technically oriented buying, pushed gold futures to their highest close since late October on Monday.
Much of the buying was described as a flight to safety, particularly as the equity market tumbled, with short covering adding more fuel to gold’s move.
“Obviously, with all of the turmoil in Crimea, gold has basically reasserted its role as a safe-haven play,” said Jim Comiskey, senior account executive with Archer Financial Services.
Russian troops reportedly entered Crimea after the previous pro-Russian government of Ukraine fell. CNN quoted Ukraine’s defense ministry as saying that the Russian commander of the Black Sea Fleet went aboard a blocked Ukrainian warship in Crimea’s Sevastopol Harbor and issued a threat to surrender or else face an attack. Russia’s parliament is also reportedly considering the annexation of Crimea. Western nations have condemned Russia’s actions.


Gold price tries again to break through $1,360 resistance

Mama Yellen spake to the Senate Banking Committee, and her remarks are the reason cited by the media for stocks rise today. As usual, I couldn't tease anything so optimistic out of her remarks, but observed she has adopted the Greenspan Technique of saying nothing in a lot of words. But if stocks were willing to rise on a speech like that, they were rising anyway.

Coming week probably put the cap on gold prices for a little while. Stocks are laboring to rise, but not convincingly. Of course, I might have it all wrong and this might prove no more than a short breath-catcher before the gold price tries again to break through $1,360 resistance.


Gold Chart - Stochastic indicator that is flashing a warning

The Gold Price very nearly broke upward through its since-August-2013 downtrend line this week, the chart shows a double bottom, other indicators are floating upward, and it has broken through its 20 week moving average. The daily chart is just too beautiful to miss. Look here, The gold price hath climbed straight up from an upside-down head and shoulders up through the neckline, broken through old resistance from $1,290 - $1,300, and today closed above its 200 DMA for the first time since February a year ago.

Only problem with this picture is that it can leave us so giddy that we overlook that stochastic indicator that is flashing a warning. I don't think this rally has ended, but around $1,350 - $1,360 it will likely begin losing altitude. This rally has run since 31 December 2013.


Gold is fading

After yesterday’s rally in the gold price, gold is fading. As mentioned yesterday, physical demand has slowed over the past fewdays, which could drain some support for gold. In fact, with the rally in the gold price yesterday towards $1,340, gold demandfrom China seems to have eased already. This is evident in the SGE premium, which overnight dropped from around $10/oz yesterday to $7/oz this morning. This premium is down from almost $20/oz on 15 October when gold was trading below $1,290. As a result, from a tactical perspective, we believe that price rallies should be sold
into on approach of $1,450.

We maintain it will be difficult for gold to sustain a rally in an environment where investment demand via the ETFs is weak, and physical demand in Asia falls away on price rallies. That said , we would expect physical demand to pick up below $1,300, as it did around 15 October. Furthermore, US bond yields have decline d sharply since yesterday,
with the 10-year government bond trading at 2.49% this morning, down from 2.75% less than a week ago—lower bond yields are supportive for gold. This in our view, combined with physical demand that strengthens below $1,300, makes shorting gold even more risky when the price is below $1,300.

Gold support is at $1,305 and $1,283. Resistance is at $1,330 and $1,346. Silver support is at $21.20 and $21.01, resistance is at $22.10 and $22.20.

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