Gold ended flat to UC Friday after an early rally to record highs faded on profit taking,

The precious Yellow metal posted its 4th running weekly gainer on Friday. Bullion prices surged early in choppy trade, then faded as players sold Gold to cover losses in commodities and Crude Oil markets, traders said.”There is some margin-related selling in gold triggered by losses in other assets. And the technical indicators are very high, it’s not surprising that we would have consolidation today,” said Bill O’Neill, partner of New Jersey-based commodities firm LOGIC Advisors.

LTN notes that a rise in the relative strength index for Gold’s that tells traders to take some money off of the atble . Gold’s RSI rose to above 70 this week, this level is considered an overbought signal technically. A reminder though, the market can stay over bought for a long time.
Sales of European and US coins, bars and exchange-traded Gold funds rose last week, and open interest in COMEX futures rose to an all-time high Thursday.

Gold coin demand in Europe and the United States was strong last week, with the US Mint on track to post its highest monthly sales year to date for the popular American Eagles coins, and Friday, the US Mint data showed American Eagle 1 oz Gold coins totaled 72,500 oz so far in May, exceeding 60,500 ounces in the entire month of April. Physical Gold products such as coins and bars are traditionally a safe haven for anxious investors in times of economic and geopolitical crises.

Spot Gold fell 2.4% from its earlier record high of $1,248.95 oz, .US Gold futures for June delivery on the COMEX division of the New York Merc settled down US$1.40 at US$1,227.80 at the end of pit trade on Friday.

Gold players cashed in gains as US. stock markets fell more than 2%, Crude Oil lost 4%, and base metals also sold off.

Gold’s last break above US$1,200 oz in December 2009 was followed by a deep correction. Prices dropped as much as 5% the day after hitting a then-record US$1,226.10. We do not expect that in here as the old resistance is now the support from a technical POV, and the fundamentals are saying that inflation is heating up and will be with us in the next 24 months or so.

Again, investment interest in physical Gold was strong, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, at a record high 1,209.5 tonnes on Thursday. The fund’s reserves have risen 68.5 tonnes or 6% in the last 4 weeks. The SPDR ETF is the world’s 6th largest holder of Gold, ahead of Switzerland, China and Japan. Safe-haven buying is seen continuing to support Gold prices, their current correction notwithstanding.

Silver tracked Gold lower to US$19.25 oz against US$19.41, Platinum was at US$1,713.50 oz against US$1,731.50 and Palladium at US$525.50 against US$537.

The Overall Technical Outlook for Gold

Comex Gold (GC)
Gold’s up-trend extended last week reaching a record high of 1249.7 before retreating a bit on profit taking. With 4 hours MACD staying below signal-line, initial bias is Neutral this coming week and some consolidations might be seen during the beginning of the week. Any Southside action is expected to be contained above the 1170 Key resistance level turned support, and bring a rally resumption. A break above 1249.7 will focus on 1300, a Key level next.

The Big Picture: The strong break of thru 1227.5, the past high augurs that the rise from 931.3 has resumed. This rise is treated as part of the long term up-trend, and should now target 100% projection of 931.3 to 1227.5 from 1044.5 at 1340 next.

On the Downside: A break of the 1170 resistance turned support is needed to be the 1st sign of topping action. Otherwise, my POV remains Bullish in here.

The Long Term Picture: the rise from 681 is treated as resumption of the long term up-trend from Y 1999 low of 253 after interim consolidation from 1033.9 has completed in form of an expanding triangle. The next long term target is 100% projection of 253 to 1033.9 from 681 at 1462 level. So, I am Bullish as long as 1044.5, the Key support holds. Stay tuned…

The Overall Technical Outlook for Silver

Comex Silver (SI)
Silver rose sharply to 19.845 last week before retreating a bit. The development suggests to me that the medium term rally is still in progress.

And even though some sideway trading may be seen early in the week, I expect Southside to be contained by the minor support at 18.40, and bring a resumption of this rally.

On the Upside: A break above 19.845 will target 100% projection of 14.65 to 18.605 from 17.08 at 21.035 next. But a break South of 18.40 will augur that Silver may have topped out in here, and will turn the focus to the 17.08 support level for confirmation.

The Big Picture: the entire medium term rally from 8.4 remains in progress, and should extend to 19.55/21.44, the Key resistance zone.

Please note that there is no change in my POV that the rise from 8.4 is part of the consolidation pattern that started at 21.44, the Y 2008 high.

So, I expect strong resistance at the 19.55/21.44 fibo resistance Zone to limit the upside, and bring on a reversal.

On the Downside: a break of 17.08, the Key support will be an important sign for a reversal, and will turn the focus to 14.65 for confirmation.

The Longer Term Picture: the up trend from the Y 2001 low of 4.01 topped out at 21.44 and subsequent price actions are treated as correction/consolidation to this up-trend. The fall from 21.44 completed after drawing support at 8.5 the Key level.

But, the subsequent rally off of 8.4 is not displaying a clear impulsive structure and hence, I still prefer the case that it is the 2nd wave of the wide range consolidation pattern. Another medium term fall should be seen for retesting 8.5 before completing that consolidation, strong support is expected at 5.45/8.5 support zone to conclude the consolidation. Stay tuned….—-Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on May 16th, 2010and filed underEquities, Latest News, Limelight, Markets, News & Events, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site