Gold Chart and comments

Gold has made it into a formidable resistance level near $1680 which has served to bring out some heavy selling, just as expected seeing that a breach of this defensive line by the bulls will set the market for a run to $1700 and higher. Gold bears can read the charts just as we can and understand what will bring in the momentum buyers if they fail to hold it here.

If the recent price advance falters here at this critical zone, then we will see a setback towards $1650 – $1645 initially followed by a bit deeper drop to $1620 or so if the dip buyers are a bit sluggish in making their appearance.

On the topside, a push through $1700 sets this market on a course to challenge $1720 – $1725, above which lies much stronger resistance just above $1750, a level which I might add, needs to be taken out to accelerate the recent move higher.

Risk trades continued today with the Dollar seeing some selling pressure as the Euro moved further away from its recent 52 week low. The Dollar is sitting on top of some important chart support which coincides with both the 50 day moving average and a horizontal support level. I would not be surprised to see it bounce higher from here. If it does not, then we could see it drop down to 79 very swiftly. Bonds would probably drop off rather sharply also as it would indicate another wave of money flows into the risk trades and away from the safe haven “risk aversion” dollar.

That generated commodity-wide buying as the CCI (Continuous Commodity Index was up nearly 1.4% today. It is closing in on some important overhead chart resistance so we will see if the bulls can continue to take it higher or if the urge to snatch some money off the table strikes first.

Even natural gas put in a very strong rally off its 52 week low made early in the session on the news of cutbacks in production by Chesapeake.

The natural gas market may have bottomed today based on the very bullish chart pattern. This market however has had a habit of putting in some strong moves higher only to then resume a downtrend when the field resumes focusing on the enormous supply picture once the short covering rally is over. With the huge amounts of shale gas being produced, it is going to take other suppliers to follow the lead of Chesapeake if this is going to be a definitive bottom. That being said, natural gas is incredibly cheap. Consumers are most definitely enjoying this even if the industry as a whole is not!

Author: Trader Dan, specialized in commodities

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