The Chart du Jour
Despite a rather hefty slide in the oil price today, gold punched signficantly higher. The CRB fell. It appears as if our ruminations of June 24th. were reasonably astute, at least for the moment. Now we just need wheat to perk up even in the face of a falling CRB, and our technical visions will be truly fulfilled.
s there a macro "thred" behind all these disparate movements? We think not. In the case of oil, it's just an over-bought market coming undone (bullish sentiment numbers having been above 94% bullish for quite some while). In the case of gold, it may just be its normal seasonal tendencies starting to show through.
You see, it seems that gold almost always rallies at this time of year between the last week of June and onwards until Labor Day. If you took the average performance for this metal during these months over the past twenty years and added them all together, you would net see a net gain despite this market's overall trend lower.
Why, you might ask should this be the case? It turns out in the real world that Christmas comes early to the gold market. Jewelry manufacturers start to enter the market in late June as buyers in order to have sufficient gold inventory to fabricate their products by the Christmas selling season. If they buy any earlier, they unnecessarily tie up their capital too soon in a non-interest bearing asset with some price exposure. If they buy too much later, they cannot guarantee having sufficient product fabricated in time for the fall selling season. If that sounds overly simplistic, perhaps too simple, fair enough -- there are always a host of economic events transpiring in the world, and gold demand for jewelry production is just one of them. Nonetheless, it does tend to have a nice underpinning effect and produce a natural positive bias to the price, other factors being equal.
The Chart below is of the cash gold price. At this point, the next area of resistance is the 200-day moving average up at $306. If we can clear that level successfully, the underlying Fibonacci rhythm of this chart suggests $370 as a likely target. Readers of these pages will remember our first suggestion to buy gold near $273 with a $268 stop. We then raised our stop to our entry point, and will now raise it again to just under Wednesday's low at $281.55. This guarantees us approximately an $8 profit (minus any skid on such a stop's election), while we will let our profits run. For those so inclined, $306 would be a natural level to scalp a few short term profits, but overall, this chart and the chart of mining house Anglogold look quite nicely poised.
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