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Test Of Support On Bullion ETF’s

May 17, 2011 6:19 AM ET
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The LFB's Blog
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Headlines and Open Positions:
News wires are covering the increase in bullion margin requirements required to hold bullion positions as a reason for recent price declines. Trade desk updates recently highlighted the potential for moves lower in both bullion and in GLD and SLV, the exchange traded funds (ETF’s) that track bullion momentum.

Those moves look to have completed their near-term cycle. Any existing short-gold or silver positions should be closely monitored while recent price action is absorbed, as potential reversal signals to move long were trying to form last week.

Bullion Price Action:
Strong buying activity was seen at 1490 on gold, and at 33.00 on silver in April and May.
These areas (swing points) will be closely monitored and market alerts sent to subscribers if they break.

Main gold support: 1470. Main gold resistance: 1520.
Main silver support: 32.50. Main silver resistance: 36.50.

Daily trading range is $19 on gold and $1.20 on silver, which are above the historical norm and indicate that speculative interest is still high.

ETF Price Action:
Strong buying activity was seen at 144.50 on GLD in April, 32.50 on SLV in March.
These areas (swing points) will be closely monitored and market alerts sent to subscribers if they break.

Main GLD support: 144.00. Main GLD resistance: 151.50
Main SLV support: 31.50. Main SLV resistance: 36.50

Technical Correlations:
50-day Simple Moving Average (SMA) on gold is at 1458 and at 42.00 on silver. 20-day SMA on gold is at 1501 and at 38.70 on silver. Gold bullion has a 12-month 90% correlation to the euro (Eur/Usd) currency pair.

A buying signal will form if gold closes the week above 1506, and could be sustainable if global equity and risk markets find buyers. Silver set up a trade signal to buy from 37.00, but failed to confirm that both potential and momentum would be strong enough to easily follow through in trade on Tuesday.

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