Despite the NY cartel working overdrive today under the blind eye of the Enforcement Division, this takedown looks worse than it actually is according to Sean Brodrick below.

Regards - VHF

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Gold Pulls Back - Get Me A Fainting Couch!

Sean Brodrick

July 1, 2010

On Monday, I laid out a case for the euro going higher and the U.S. Dollar and gold going lower. We got all three today in spades. Gold took it on the chin, closing down more than $48 a share. It seems like the bear raid I talked about succeeded, in that the bears were able to break gold’s short-term uptrend.

So where do we go from here? Let’s look at the charts for some guidance. We’ll start with a daily chart of the SPDR Gold Trust (GLD: 117.04 -4.64 -3.81%), which tracks the price of gold closely …

You can see that GLD has broken down the short-term uptrend and the 50-day moving average. The sell-off came on high volume, which is bearish. This move needs confirmation. I’d look for the GLD to pull back to support around 112.9 or 110.4.

On the bottom of the chart, I’ve put the prices of the GLD and the CurrencyShares Euro Trust (FXE: 124.77 +2.90 +2.38%), so you can see indeed that gold has been moving opposite the euro. If the euro is going to bounce here for a bit, as I suspect, then gold will likely go lower.

Now, let’s look at a weekly chart of the GLD …

The weekly chart looks much more bullish. You can see the GLD’s pullback isn’t even testing the weekly uptrend yet. However, that uptrend lines up nicely with one of the support levels I showed on the first chart – around 112. Volume on the pullback is mediocre. You can see on the bottom of the chart — where I have divided the price action in the GLD by the price action in the SPDR S&P 500 ETF (SPY: 102.76 -0.46 -0.45%) — that despite its troubles, gold is still outperforming the S&P 500 by a wide margin.

Now, let’s look at a monthly chart of the GLD …

Obviously, the bears haven’t made a dent in gold’s monthly upward trend. I would expect that uptrend to be tested eventually, but probably not anytime soon. And as you can see on the bottom of the chart, gold’s outperformance looks even stronger longer-term.

In sum, I’d say this pullback in gold and rally in the euro isn’t much to worry about now. I expect both to revert to their major trends.