LEK CHANSOUR GOLD TRADING: ពត៌មាននិងការព្យាករណ៏តំលៃមាសសំរាប់ថ្ងៃ ៣០វិច្ជិកា

Gold Finished with Minor Gains as Stronger Dollar Capped its Gains

30 Nov 2010	1st resistance	2nd resistance	3rd resistance
Today’s resistance US$	1372	1379	1389
	1st support	2nd support	3rd support
Today’s support US$	1356	1346	1340
Today’s pivot point US$	1363

The Day’s Story:

Gold finished marginally higher on Monday in a quiet trading. An earlier dip in prices saw some bargain hunting as well as some fresh safe haven buying which drove the prices back above in positive territory. Any further upside was limited due to stronger U.S dollar which rose to a fresh two months high against its European counterpart. Gold peaked to its all time high of $1424 an ounce on November 9th after FED announced its QE2 package details. Yellow metal has since come off those levels and went into a shallow correction falling down to $1314 levels but has regained some of its lost ground in recent days as European debt crisis made headlines again. Geopolitical tensions in Korean Peninsula are also bullish for gold due to its status as a hedge against crisis but there has been a muted reaction to that news so far. In December, gold has risen 7 out of last 10 years and is up by 25% this year. Gold has managed to rise 32 out of 47 weeks so far in 2010.

Main U.S indexes finished lower but a late rally in U.S stocks helped trim most of their intraday losses. The Dow Jones Industrial Average closed down 39.51 points or 0.36%, to 11052.49. Standard & Poor's 500 declined 1.64 or 0.14%, to 1187.76 and Nasdaq Composite fell 9.34 or 0.37%, to 2525.22. European debt worries weighed most on the stocks as traders remained concerned about debt situation in Eurozone despite Irish bailout. No major economic data was released on Monday. In other news President Obama announced a pay freeze for Federal employees for next two year hoping to save $2 Billion in 2011. Some concerns were also shown at latest confidential data released by WikiLeaks as it could be damaging for U.S and its strongest allies. Stocks in Europe fell sharply with main indexes losing over 2% of their value.

We expect some sharp movement in gold price as market will have a lot of economic data to digest this week. Some of the major U.S. economic reports on the calendar this week include the Chicago Purchasing Managers Index and consumer confidence today, the ADP private-sector employment report and Institute for Supply Management’s manufacturing survey Wednesday, jobless claims Thursday and the monthly jobs report and ISM service-sector survey Monday. The Monday Non-Farm payroll report which is the arguably the most

Important economic report for financial markets will give further clues about U.S jobs market which is still hovering near double digit unemployment rate despite official data indicating U.S economy out of the recession. Market is expecting non-farm payroll numbers to rise by 165,000 in November. Better than expected numbers could help stocks to resume their uptrend enabling bullion to tag along as well. A disappointing jobs figure could trigger safe haven buying interest in gold so gold may remain supported regardless of the outcome on Friday.

U.S. dollar index enjoyed decent gains to start the week. Technical analysts suggest the dollar index has put in a near term market low due to a boost in its safe haven demand at the back of crisis in Europe. Dollar was favored by ongoing Eurozone debt issues which have damaged European common currency in recent weeks sending it to fresh two months low against dollar on Monday. Stronger greenback also put a lid on gold’s gains for most of the Monday’s session as inverse correlation between the two assets is strengthening after erratic couple of weeks. Gold and Dollar move in opposite directions to each other due to their inverse correlation as dollar weakness enhances demand for dollar denominated assets fro holders of other currencies. Both however, can travel in the same direction at time of heightened economic uncertainty as was the case in first half of this year during Greece’s debt crisis. Similar trend has been seen during last few days as European debt crisis resurfaced. Adding fuel to fire was escalating military tensions between two Korean neighbors which boosted safe haven demand for both gold and greenback.

Feud between North and South Korea has escalated as both sides accusing each other for initiating the recent conflict although China has stepped in to calm the tensions but it will remain a critical issue until situation is fully resolved. European debt concerns are just not going away despite $112.5 Billion Irish bailout package. Gold has been favored by European debt contagion fears during most of this year. At time both gold and dollar moved in same direction breaking away from their organic inverse correlation relationship. In latest developments focus has shifted from Ireland to Portugal and much bigger player Spain as they could be next in line to ask for help. Questions that raise in minds are how badly affected these countries are and what other countries are going to be added to that list as most countries do have debt issues to some extent. It will be impossible to bailout all those countries if situation gets worse so steps must be taken to contain and address the issue in a manner that these kinds of disasters could be minimized in severity or stopped altogether in future. Until market is satisfied with such a solution, gold price will remain well supported.

Gold price started first session of the week with some losses and came under further selling pressure during early Asian trading hours. Gold fell to its intraday low of $1353 an ounce during that period but bargain hunters once again bought the latest dip in prices lifting gold up to its breakeven level late in Asian session. Gold visited positive territory for a brief period during Early European trade but fell back into red zone once again as stocks in Europe slumped. Gold fell close to its intraday low as markets in U.S started their trading day but quickly turned around and pared its losses during rest of the session. Gold managed to finish its day with minor gains at $1366.2 an ounce compared to its previous close of $1362.8 an ounce.

Other Metals:

Silver futures for March delivery closed up 42 cent to $27.19 an ounce on Monday.

Platinum futures for January delivery fell $0.60 to $1,644.60 an ounce on NYMEX.

Palladium futures for December delivery rose by $16.50 to $693.00 an ounce.

N.Y. Copper for March delivery closed up 1 cent to $3.77 a pound on Monday.

Gold (News and Views):

February Comex gold closed up $3.20 at $1,367.50 an ounce on Monday.

The London P.M. gold fixing was $1,357.00 on Monday compared to its previous P.M fixing $1,355.00.

The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings rose by 3 tons to 1285.084 tons on November 22 down from 1289.336.

The dollar index, which measures the U.S. currency against a basket of six major currencies, rose by 0.46 To 80.81 on Monday.

Crude Oil for January delivery rose by $1.97 to $85.73 on Monday on New York Mercantile Exchange.

Gold hit its true peak on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation in 1980 dollars, that translates to an all-time record of $2,184.08 an ounce, in 2010 dollars.

The net length of managed-money accounts fell from 229,543 lots for futures and options combined on Oct. 12 to 173,067 as of Nov. 16, the cut-off date for the most recent weekly data from the Commodity Trading Futures Commission. This was the first drop below 200,000 since August.

Factors Affecting Gold Price Yesterday:

"You have seen moves in the currency markets that are offsetting, to an extent, the sovereign concerns," said RBS Global Banking & Markets analyst Daniel Major.

"The stronger dollar ... has clearly put pressure on gold, and offsetting that you have people looking towards gold as ahedge against potential devaluation of currencies, and debt levels, and potential defaults," Major added.

UBS analyst Edel Tully said in a note that the brokerage’s physical gold sales to top bullion consumer India last Friday were the largest since Oct. 27, when gold prices slipped.

"This is a strong indicator that there's much residual physical demand in the system that will provide ample support on dips," Tully added.

If your currency is declining in value, there’s a move to get into something that will hold its value, and gold is that instrument at the moment,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago.

Gold’s gains may be limited because “a big head-and-shoulders top is forming on the daily chart,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “People are shying away from gold.”

“The focus is shifting from Ireland [and] people will be looking at Portugal, Spain, and so forth,” said Andrey

Kryuchenkov, an analyst at VTB Capital in London. “The situation in Europe is not getting much better.”

Gold Future Outlook:

Comex gold could be “sloppy” for a while but eventually may rise “more convincingly” whenever the dollar falters again, says MF Global. Gold hit record highs in early November, but then retraced as the dollar strengthened. More recently, gold has decoupled some from its inverse relationship to the dollar, with two often rising in tandem as safe havens. MF Global notes there is “no letting up” on investment demand for gold, with the world’s exchange-trade products now holding nearly 2,100 metric tons, equivalent to roughly nine years of U.S. mine supply. Still, there are signs of retail demand flagging due to high prices. Going into 2011, MF Global says it is “friendly” to gold on an inflation-adjusted basis. “Shorter term, the next month or two might be sloppy,” as the European debt crisis may intensify and channel money into the dollar, MF Global says. “It will only be when the dollar starts to weaken will we see gold prices move up more convincingly,” MF Global says.

Standard Bank says that a second round of quantitative easing by the Federal Reserve is already fully priced into a gold market at $1,360 an ounce. Still, the bank favors buying gold on any price dips. “Given our view that gold is pricing QEII already, we cannot use the QE argument to justify a higher gold price,” Standard says in a research note. “However, the same argument would suggest that any sell-off in gold from here would indicate the metal is undervalued relative to gold’s casual drivers.” Standard lists three supportive factors. Independent of the Fed’s QE, global liquidity should continue rising in 2011. Also, whereas scrap gold came into the market in early November when were above $1,400, the latest price decline spurred renewed physical buying, the bank says. Also, sovereign-credit risk in Europe remains supportive for gold. “As a result, our preferred strategy…is to buy gold on dips,” Standard concludes. “We also believe gold in euro terms should outperform gold in dollar terms.”

Newsletter writer Dennis Gartman says he continues to favor holding gold, although in currencies other than the U.S. dollar. “We are convinced, as we have been for months, that the driving force behind gold’s strength is not inflation nor dollar devaluation, but the simple notion that gold has become the world’s third most popular ‘reservable’ currency’ and that it will soon move past that of the EUR into second place,” he says in the daily The Gartman Letter. “More properly, we should say that gold shall continue to gain upon the EUR as the propensity on the part of reserve bank asset managers to hold EURs shall weaken at the margins, while their propensity to own gold shall rise. These are tectonic plates shifting very, very slowly but doing so inexorably.”

Precious metals prices experienced some weakness lately as the U.S. dollar rallied following tensions in the Korean Peninsula and the latest round of euro-zone debt-crisis management, says Morgan Stanley. “Looking into next year, we expect that inflationary fears in emerging markets will positively influence the physical demand for gold in the form of bar hoarding in the Middle East. Furthermore, gold should find support from jewelry industries in India, China and Southeast Asia, where improving economic conditions are driving demand for conspicuous luxury items.”

Technical Analysis (By Jim Wyckoff):

Technically, February gold futures prices closed nearer the session high Monday. The gold market bulls have the near-term technical advantage. A four-month-old uptrend is in place on the daily bar chart.

Bulls' next near-term upside technical objective is to produce a close above technical resistance at the October high of $1,389.50.

Bears' next near-term downside price objective is closing prices below solid technical support at $1,340.00. First resistance is seen at Monday's high of $1,370.00 and then at $1,375.00.

Support is seen at Monday's low of $1,354.50 and then at $1,350.00.

Wyckoff's Market Rating: 7.0.

More Technical Analysis:

In the daily chart below we can see gold Price bouncing back from Upper Bollinger band and now hovering just below Bollinger middle band which sits along with rising trend line support (now resistance). Price did breach these levels but quickly bounced off. A successful break above these levels is needed for gold to maintain its bullish stance in short to medium term.

A Head & Shoulder pattern is forming on daily charts which can be seen on chart below. If price manages to break below its neckline provided the complete formation of the pattern, we are in for more losses and could see price to fall below $1300 levels.

Some analysts pointed to a potential head-and-shoulder pattern as a bearish technical explanation for why gold did not rally strongly on concerns about the fiscal health of euro zone economies and rising tensions on the Korean peninsula.

However, Adam Hewison, president of MarketClub.com, said the trend of the MACD momentum indicator model is "really starting to turn up" on gold charts, and the fact that the MACD came down from an oversold level suggests the odds for a bearish head-and-shoulder move is low.

"If we see a little more strength today or tomorrow, we will see that bullish MACD crossover. I think that could be the first indication that we'll see another good viable move to the upside," Hewison said.

Most of the indicators we use are painting a rather mixed picture on daily charts. Slow Stochastics suggest

Overbought conditions on daily chart and Friday price fall was in line with slow Stochastics.

RSI is in a neutral territory and have some way to go to reach over bought levels. RSI is also sitting just below its short-term resistance level and will have to successfully breach this level to resume its uptrend.

MACD is still hovering in bullish zone but well off its earlier levels. MACD line is travelling towards Zero and with falling histograms we can see the current uptrend losing its steam.

1378-82 area is to watch for in coming days as critical resistance level, a successful break above this level will call for $1400.

Price will find support at $1348-51 levels and break below it can call for $1320-25 level, a major support area.