Gold Trend Feb 05/2013

Posted: 04 Feb 2014 08:59 PM PST

Follow The XM Bull
Long Term ~ Neutral - need a monthly close above 1800 to confirm the bull market final phase underway
Medium Term ~ Bearish - Need a close above 1301-1340 to neutralize
Intermediate Term ~ Bullish/NEUTRAL – 1272 DID NOT GET TAKEN OUT ON THE CLOSE yet and thus intermediate term did not go full bullish.
Short Term ~ BULLISH – we need a close above 1272 to keep uptrend going. We must hold 1222 on a closing basis otherwise we fall out of the channel on the hourly. New short term cycle begins --- Monday was higher – now Tuesday is 1st day outside of window.

Initial Resistance 1263-1275 2nd tier 1280-1284
Initial Support 1240-1250 and 2nd tier 1222-1232
Last update listed 1263-1275 as resistance and the high was 1261.
Support was listed at 1240--1250 and the low was 1246.

Overview

U.S. Treasury Secretary Jacob Lew warned Monday that the United States will exhaust its borrowing authority on Friday without action by Congress to lift the debt limit.

"Time is short. Congress needs to act to extend the nation's borrowing authority, and it needs to act now," Lew said in prepared remarks at the Bipartisan Policy Center, a Washington think tank.

"In just a matter of days, the temporary suspension of the debt limit will end, and the Treasury Department will have to start using extraordinary measures so the government can continue to meet its obligations," he said.

Conventional wisdom had it that Treasury yields would rise this year amid the Federal Reserve's tapering of its quantitative easing.

But it hasn't worked out that way. Instead of selling Treasury securities, investors have bought them, pushing the 10-year Treasury yield down to a 12-week low of 2.66 percent Friday. The yield stood at 3.04 percent Dec. 31.

On our weekly update GoldTrends favored a peak and pullback in bonds back to the moving averages at 2.4 to 2.6 and we reached under 2.6 on Monday. We still have the potential into the beginning of March after a a potential bounce this week.

Argentina's president, Cristina Fernández de Kirchner, and her ministers blame foreign 'vultures' for an economic meltdown as power cuts hit Buenos Aires and goods vanish from supermarket shelves.

The economic panic leading to price mark-ups of this kind began in mid-January, when Argentina's central bank reserves dipped below $30bn, forcing the government of President Cristina Fernández de Kirchner to drop its policy of injecting large quantities of dollars into the exchange market to shore up the overvalued peso.

The next financial lifeline Greece will receive from Germany and its European lenders will be worth €10-20 billion, the German magazine Der Spiegel reports, citing a document leaked from Berlin's finance ministry.

The rescue package, which will be the third for Europe's most troubled economy, is considered "extra aid" by German Finance Minister Wolfgang Schauble, who said the sum would be "far smaller" than the €240 billion is has already received from international lenders.

"What is sure is that any further aid would be much less expansive than whatever help [has been given] so far," Schauble told the German finance magazine Wirtschaftswoche.

Deutsche Bank: "We've Created A Global Debt Monster"

From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn't allowed to be at the mercy of market forces.

It's a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy - that will be the biggest in the world within the time frame of most of our careers - struggles to allow a $500 million investment product to default without there being market fears of it igniting panic in financial markets.

This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We've created a global debt monster that's now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimized by uber aggressive policy responses.

Inflation-adjusted interest rates are still too low in developing nations for Citigroup Inc. and Goldman Sachs Group Inc. to foresee an end to the worst emerging-market currency sell off in five years.

One-year borrowing costs in Turkey are 3.6 percent, less than half of the average in the three years before the 2008 global financial crisis, even after the central bank doubled its benchmark rate last week, according to data compiled by Bloomberg. The real yield for Mexico is almost zero, while South Africa's is 1.4 percent, compared with an average of 2 percent over the past decade.

Central-bank rate increases in Turkey, India and South Africa last week failed to contain January's 3 percent sell off in emerging-market currencies. Citigroup says yields aren't high enough to attract the capital needed to finance current-account deficits in some of those nations. Competition for capital is intensifying with the Federal Reserve paring monetary stimulus, while the International Monetary Fund is calling for "urgent policy action."

Gold Short Term

We have moved to the April Gold contract – and are still looking at how the slight difference in the patterns are and how they relate to our channel lines.

The PRICE PATTERN IS OVERLAPPING and while not too choppy, it still has some characteristics of counter trend. Monday's initial move was higher but Tuesday's pullback did hold where it needed. It's still going to take a close above 1267-1272 to favor higher. Resistance will be tough in the 1275-1280 area as well. If we get above there then the potential to move towards 1322-1333 will be favored.

Support is 1240-1248 and then 1220-1230. We believed we were on the verge of a MOVE early this week but it looks like the job numbers and the NFP report on Friday is going to be the price mover of the week. At this point either way can still go. We either support here at 1240 or that one level lower. A close below 1220 favors the downside. A close above 1255 IS FIRST SPOT we need to overcome for a chance at the upside and we got it on Monday but just barely and on Tuesday we just missed it. We still have not touched the lower channel line and that's unusual. That Dec 31st low was so orchestrated that I have to wonder if the channel should be drawn off the first low after it? That dotted trend line I included was to see how well it supports. So far so good....but we're just on the edge and we still can break lower.

What Next?
China is closed this week so be careful. This cycle has not fully tipped its hand. We've got to get beyond 1255 and we've been there since the Monday close. Also the NFP payroll report is out on Friday. Stocks should be ready for a bounce near this area---- we'll see.
Bottom Line
The next two weeks should have been decided by now and that is worrisome. Mid week Wednesday is here but we must begin to see upside in the next 48 hours.

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Posted: 04 Feb 2014 06:23 PM PST

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