Gold Analysis and Strategy 11th of July 2010 by Florian Grummes

Gold Spot Price Analysis

Gold in USD (one ounce = US$1.211,40)

· During the last two weeks Gold corrected nearly US$80 or 6,3%. The lows came in around US$1.185 last Wednesday. Gold found short term support exactly at the trendline.

· Since thursday we are witnessing a move back above US$1.200 which could extend further to a maximum of US$1.235. Normally prices fluctuate around the 50-dMA (US$1.216,55) for some time before a decision is being made. The important short term Fibonacchi Retracements are at US$1.215,81 (38,2%) and US$1.234,60 (61,8%). Gold should recover to one of these two price targets.

· If instead the resistance at US$1.215 can not be taken out quickly we have to be very careful. Especially the weekly chart indicates a continuation of the correction. The rising wedge has not yet been broken but the divergences in MACD and RSI as well as the big gap down to the 200-dMA (US$1.134,55) are not looking good. The lower weekly Bollinger Band (US$1.077,50) gives a lot of room for an extended correction.

· The medium- and long term picture is still very bullish. My next price target is the Fibonacchi - Extension (261,8% of the last big correction) at US$1.600. This might be possible until end of this year or spring 2011.

· The Dow Jones/Gold Ratio is currently at 8.42 points.

· Long term I expect the price of gold moving towards parity to the Dow Jones (=1:1). The next primary cyclical change is still years away. This means we are still in a long term bull market in gold (and also commodities) and in a secular bear market in stocks.

Gold in EUR (one ounce = 958€)

· The correction during the last two weeks hit the price of EUR-Gold even stronger. Since the highs in early june EUR-Gold corrected nearly 10,6%.

· There are still a lot of negative divergences in MACD and RSI as well as very huge gap down to the 200-dMA (830€). Especially the weekly chart indicates more need for consolidation and correction. Short term prices in EUR could recover back to the 50-dMA (979€).

· Overall this summer correction could force Gold in EUR down to around 850€ within the next weeks and months.

Goldbugs Index USD (462,59 points)

· The Goldmining Index HUI lost nearly 13,4% and proved again to be extremely volatile. But so far the trendline is support.

· The Index should not fall below 445 points anymore otherwise we will have a big sell signal.

· All in all a kind of unclear picture. I stick to my view that there is no reason to buy gold stocks right now.

Gold COT Data

The Commercials reduced their shorts by nearly 40.000 contracts but those numbers are still far away from a position that would be equally to important lows in the past.

04/18/2009 = -153.419 ( PoG Low of the day = US$885 )
12/01/2009 = -308.231 ( PoG Low of the day = US$1.190 )
05/11/2010 = -282.644 ( PoG Low of the day = US$1.201 )
06/15/2010 = -278.944 ( PoG Low of the day = US$1.220 )
06/22/2010 = -288.916 ( PoG Low of the day = US$1.232 )
06/29/2010 = -289.956 ( PoG Low of the day = US$1.231 )
07/06/2010 = -249.142 ( PoG Low of the day = US$1.191 )

Gold Seasonality

Gold has a strong seasonality. During june, july and august the price normally moves down or sideways while september is one of the strongest month in the year.

Gold Sentiment

Still 79% of the advisers are bullish on gold. As well I have the impression that there is a lot of new and inexperienced money in the gold market now. The sentiment has to cool down before a sustainable bottom can be found.

Conclusion

· In the medium and long term term Gold should be on the way to my next price target around US$1.600. But right before those big moves there has always been a nasty setback in july and/or august to shake out the weak hands.

· Short term Gold could recover up to US$1.215 or even US$1.235. From here the bears should attack again and force prices down to US$ 1.140-US$1.165 within the coming weeks and months.

· In case of a renewed deflationary collapse I would not be sup rise to see Gold moving down to under US$1.000. This of course would be a great buying opportunity.

· Any move above US$1.240 neglects the negative technical picture.

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	Gold Spot Price Analysis Gold in USD (one ounce = US$1.211,40) · During the last two weeks Gold corrected nearly US$80 or 6,3%. The lows came in around US$1.185 last Wednesday. Gold found short term support exactly at the trendline. · Since thursday we are witnessing a move back above US$1.200 which could extend further to a maximum of US$1.235. Normally prices fluctuate around the 50-dMA (US$1.216,55) for some time before a decision is being made. The important short term Fibonacchi Retracements are at US$1.215,81 (38,2%) and US$1.234,60 (61,8%). Gold should recover to one of these two price targets. · If instead the resistance at US$1.215 can not be taken out quickly we have to be very careful. Especially the weekly chart indicates a continuation of the correction. The rising wedge has not yet been broken but the divergences in MACD and RSI as well as the big gap down to the 200-dMA (US$1.134,55) are not looking good. The lower weekly Bollinger Band (US$1.077,50) gives a lot of room for an extended correction. · The medium- and long term picture is still very bullish. My next price target is the Fibonacchi - Extension (261,8% of the last big correction) at US$1.600. This might be possible until end of this year or spring 2011. · The Dow Jones/Gold Ratio is currently at 8.42 points. · Long term I expect the price of gold moving towards parity to the Dow Jones (=1:1). The next primary cyclical change is still years away. This means we are still in a long term bull market in gold (and also commodities) and in a secular bear market in stocks. Gold in EUR (one ounce = 958€) · The correction during the last two weeks hit the price of EUR-Gold even stronger. Since the highs in early june EUR-Gold corrected nearly 10,6%. · There are still a lot of negative divergences in MACD and RSI as well as very huge gap down to the 200-dMA (830€). Especially the weekly chart indicates more need for consolidation and correction. Short term prices in EUR could recover back to the 50-dMA (979€). · Overall this summer correction could force Gold in EUR down to around 850€ within the next weeks and months. Goldbugs Index USD (462,59 points) · The Goldmining Index HUI lost nearly 13,4% and proved again to be extremely volatile. But so far the trendline is support. · The Index should not fall below 445 points anymore otherwise we will have a big sell signal. · All in all a kind of unclear picture. I stick to my view that there is no reason to buy gold stocks right now. Gold COT Data The Commercials reduced their shorts by nearly 40.000 contracts but those numbers are still far away from a position that would be equally to important lows in the past. 04/18/2009 = -153.419 ( PoG Low of the day = US$885 ) 12/01/2009 = -308.231 ( PoG Low of the day = US$1.190 ) 05/11/2010 = -282.644 ( PoG Low of the day = US$1.201 ) 06/15/2010 = -278.944 ( PoG Low of the day = US$1.220 ) 06/22/2010 = -288.916 ( PoG Low of the day = US$1.232 ) 06/29/2010 = -289.956 ( PoG Low of the day = US$1.231 ) 07/06/2010 = -249.142 ( PoG Low of the day = US$1.191 ) Gold Seasonality Gold has a strong seasonality. During june, july and august the price normally moves down or sideways while september is one of the strongest month in the year. Gold Sentiment Still 79% of the advisers are bullish on gold. As well I have the impression that there is a lot of new and inexperienced money in the gold market now. The sentiment has to cool down before a sustainable bottom can be found. Conclusion · In the medium and long term term Gold should be on the way to my next price target around US$1.600. But right before those big moves there has always been a nasty setback in july and/or august to shake out the weak hands. · Short term Gold could recover up to US$1.215 or even US$1.235. From here the bears should attack again and force prices down to US$ 1.140-US$1.165 within the coming weeks and months. · In case of a renewed deflationary collapse I would not be sup rise to see Gold moving down to under US$1.000. This of course would be a great buying opportunity. · Any move above US$1.240 neglects the negative technical picture.