Gold Spot price Analysis

Gold in USD (one ounce = US$1,189.30)

• In comparison to my last analysis two weeks ago Gold is about US$22.00 lower. Last Tuesday Gold reached a short term bottom at US$ 1,175 and turned higher again exactly at the support line of the up trend since the crash in autumn 2008. After three volatile sessions driven probably by short covering it failed to gain back the important US$1,200 level so far.

• The next big and important resistance is still the 50-dMA (US$1,216.55). Up until here any further recovery should be limited.

• As long as this resistance can not be taken out Gold remains in a short term downtrend. Still missing is a typical test of the 200-dMA (US$1,143.96) and the capitulation of most of the market participants. On top the weekly chart indicates further correction. The rising wedge has not yet been broken but the divergences in MACD and RSI are still in place. The lower weekly Bollinger Band (US$1,089.60) gives more room for an extended correction.

• The medium- and especially the long term picture is still very bullish. My next price target is the Fibonacci - 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 8.77 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.

• A quick note about the equity markets. The Baltic Dry Index doesn't look good. As long as we don't get a clear signal that international shipping prices (and therefore the state of the world economy) is improving we have to expect another form of credit contraction.

As well volatility remains in bear market values, and until that changes, markets continue to be very unstable. Until now there is no indication of a new and healthy bull market but more that of a bear market rally in the final stadium. The ongoing summer rally should therefore find its end soon.

Gold in EUR (one ounce = 922€)

• Gold in Euro is now about 120€ lower since the highs in june. Like always a parabolic spike is corrected with a hefty sell off.
• Still missing is the test of the 200-dMA (842€). Especially the weekly chart indicates more need for consolidation and correction.
• Prices under 890€ should be used to slowly start buying again. My price target remains the area around 850€.

Gold Bugs Index USD (451.85 points)

• As well the Gold Bugs Index HUI is lower since my last analysis.

• So far the 200-dMA (440.40) and the uptrend line proved to be initial support.

• Should the index move down again under 440 points we have a clear and big sell signal.

• All in all still an 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 short positions by around 33,000 contracts. This is positive. But normally a sustainable bottom in price is reached with commercial shorts under 150,000 - 100,000 contracts.

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)
07/13/2010 = -248,348 (PoG Low of the day = US$1,197)
07/20/2010 = -215,664 (PoG Low of the day = US$1,175)

At the Comex warehouse are record high 11million ounces of gold stored right now. Mark Lundeen www.gold-eagle.com/editorials_08/lundeen071710.html explained in his last analysis that this physical gold (probably coming form the Gold ETF´s) could be used to smash gold prices down.

The establishment will do everything to avoid a gold price explosion and to defend the papermoney-system.

Gold Seasonality

• Gold has a strong seasonality. During july and august the price normally moves down or sideways while September is one of the strongest month in the year. Volume is low now and we face erratic price movements all over place.

Gold Sentiment

In the "goldbull-train" are sitting quite a lot of new passengers who impatiently believe that gold has to go to the moon immediately. This of course is insane. The sentiment has to cool down before a sustainable bottom can be found.

Conclusion

• In the 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 (often in July and August) to shake out the weak hands.

• Short term the recovery could bring prices back to a maximum of US$1,206US$ - 1,216US$. Even with my best intention I can not imagine prices above this important resistance within the next few weeks. The only thing that could bring an explosion to the upside would be a war in North Korea or Iran.

• All in all the markets seem to be very unstable. The high volatility does not indicate a healthy environment. I expect the bears to take over again within the next days. This should bring gold down to at least US$1,140-1,165 during august. A decisive break of the uptrend line around US$1,180 could lead to a nasty and quick sell off.

• In case of a renewed deflationary collapse I would not be surprise to see Gold moving down to under US$1.000 in the coming months. This of course would be a great buying opportunity.