Bullish Gold on Mixing Signals

Gold price technical analysis 30 - May, 2013

Gold prices rose slightly at the beginning of the week on Monday. A correction from last-week Friday’s sell-off is in place in addition to the slightly weaker USD against other countries supported the current gold prices. Different economic data from Asia, USA and Europe confused the market helping gold to continue rising. Comex Gold Futures for August delivery was up by $4.50 to reach $1,397.50, while spot gold was up by $9.80 to be traded at $1,398.50.

The Chinese Purchasing Manager’s Index (PMI) came with 2 different results. The official data came by 50.8 this month versus 50.6 in April recording a higher than expected 0.2 percent rise and staying above 50. However, HSBC China PMI fell to 49.2 in May versus 50.4 last month. The numbers came different because both institutions use different approaches on different samples. The picture will become clearer by the release of the industrial production data later this month.

Japan’s stock market fell again today. Nikkei stock index fell by 17% in two-weeks. The Japanese consumer prices fell by 0.4% y/y in April, after it was 0.5% in March. While foreign goods’ prices rose due to a weaker JPY. The strong trading relations between Japan and the US might indicate how the US stock market will perform the next few weeks, as many analysts think. If other stock markets rallies ended like the Japanese stocks, it would be a bullish factor for gold price.

European manufacturing data was mixed this month. Euro zone PMI rose from 46.7 last month to be 48.3 in May, remaining below 50. PMI numbers below 50 indicates contraction. While the slower pace of contraction suggests the beginning of the end of Euro zone economic crisis.

The stronger demand on physical gold in India might force the Indian government to implement further measures and rules to weaken this demand and reduce the Indian deficit.

The USD started weaker at the beginning of the week. The economic data from the US and all over the world plus higher oil prices today was the main factors for the slightly weaker USD today.

The London AM gold fix today was at $1,396.75 while the previous PM fixing was at $1,394.50.

Speaking technically, the recent uptrend in gold price endorses a big bullish double-bottom reversal on the daily chart. However, the 7-months old downtrend is still intact. The first resistance was at $1,401.40 then $1,414 while the first support of gold price was at $1,388.30 then at $1,380.