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ngleaftrading.com will be providing us a chart of the week as analyzed by a member of their team. We hope that you enjoy and learn from this new feature.
Weekly Gold Report (January 7th through January 11th)
Welcome everyone to trading in 2013, where not much has changed from last year. While we are only a few days into the New Year, traders are already expecting the same type of market activity to continue for at least the next two months. Why two months? Because only a portion of the much anticipated “Fiscal Cliff” negotiations were completed at the end of 2012, so the saga will continue.
Politicians in the US knew for over ten years that they were expected to make a monumental decision by the end of the year in 2012 regarding taxes and spending, and in the eleventh hour a final decision was made to raise taxes and “kick the can” on spending for another two months. The idea was to come up with something fair and balanced, but it wound up being a one-sided victory for one party. Despite the delay on fifty percent of the decision, it was enough to avoid a broad based panic sell.
All markets, including Gold will have to not only price in everyday news, they will also have the upcoming taxes vs. spending debate to consider. Overall, it is nothing new.
While Gold prices were steady in the week leading up to the Fiscal Cliff announcement, there was increased volatility in the following days. Initially, prices broke up and out of the stale range only to see a sharp reversal a few days later. The rally, of course was based on the Fiscal Cliff but the selloff was attributed to the release of the December FOMC minutes.
The minutes showed that several FED member were at odds over the timeline of Quantitative Easing. While some are in favor of continued easing until the labor numbers improve significantly, others are suggesting the program should be cut short much sooner. The report not only erased the Fiscal Cliff gains, it drove Gold prices below the prior week’s lows before a decent bounce to end the week.
With news flow being so unpredictable, it is best to point out a few things from a technical perspective that actually make sense. As you can see in the daily chart of February Gold, prices have been in a downward range for weeks. Any attempts to move higher since late November have been pressured, and the market sees lower highs and lower lows. The futures tested the Fibonacci 61.80 on December 20th (arrow #1) before it rallied and failed at the Fibonacci 38.20 a few days later (Arrow #2). The selloff targeted (arrow #3) the convergence of two major trendlines. This area not only tests the support trendline of the downward range, but also the extension of the support trendline from the summer low prices.
The test this week will be whether or not Gold futures can hold this low. At least in the short term, it appears that it was the target for the selloff. I will be keeping a very close eye on this support and will only be convinced of a breakout when the futures close above $1700.
Good luck this week and as always, feel free to contact me directly by email at
bb****@lo*************.com
or by phone at (888) 272-6926.
Thank you for your interest,
Brian Booth
Senior Market Strategist
bb****@lo*************.com
888.272.6926
Thank you for your input ladies and gentlemen. There is no doubt, the Gold and Silver have been a tricky trade of late. Every move up in the last month and a half has met serious overhead resistance and has left the bulls at times scared of their own shadows. Additionally, many of the intraday and daily relationships that traders could once rely upon have been fractured (i.e.: moving inverse the US Dollar or acting as a "flight to safety" vehicle when stock indexes were down). Now it seems most of the major markets are operating on their own and the only real true relationship I see day to day is the inverse US Dollar/Euro trade.
But this type of market will not last. The only thing that traders can do is rely on technical levels with prudent trade strategies in the Metals. I tip my cap to anyone that predicted the three day move after the Fiscsal Cliff announcements. That was and unexpected, but I did have customers make money. I recommended buying the Metals before Christmas while the market was rangy. When the Metals spiked, I recommended rolling stops up to preserve gains and was stopped out for a profit on January 3rd. I also recommended buying back in when the Metals broke below the prior week's low and now have stops in at a break even price to cover trade costs and a bit more. If we can see another day of upward movement (without a dip to stop me out first), I will recommend rolling the stops up to preserve more gains.
This is the style of trading that we have had to follow lately because it is what the market is affording us. Until that changes, I will continue to recommend buying pullbacks at favorable lows and rolling stops up to protect gains.
Hi friends,relax and keep your nerves and.........buy what you can.The true upswing will start when cenral banks and bullion banks run out of amunition-physical gold.Add to that final understanding(many don´t have a clue about)that gold paper is nothing more than paper and dollar price of an unce is anybodys gues-3,500plus.Martin
So now above $1,700 will be a "breakout" while just a few weeks ago it was $1,800. One can assume the same could/may be said of $1,600 etc. The most bullish environment for this metal and the mining companies there could possibly be, is producing exactly...... nothing. Fed and other central banks going full bore. Negative real rates. Inflation. Etc. etc. This fact should be very telling, yet many prognosticators in this sector remain totally unobjective, code for emotionally involved. That cannot be good. Not even the fact that the mining stocks historically rise or drop in advance of big moves for the metals themselves seems to matter for many pundits. In this case the miners have been in a big ugly bear market for well over a year, a very nasty negative indication.
Just because these metals should be far higher, doesn't mean it's a sure thing. The market will do it's best to make fools of those who continue to operate non objectivally.
After the late Sept/early Oct bull-trap markups, all GAPS on this chart have been filled while the market consolidated, except for 1758-60 on the way down. So that will be the next objective, some $120 up from current levels. There will be resistance around 7115 where resistance within a flag may need stimulus as fiscal-cliff worries surface again in February.
As far as Technicals are concerned, This weak is quite crusial, and every chances to find lower break-out, on or around wednesday or thursday, but if it will not record so, then Friday's quotes will play a major roll one should trade with very strict stops for either sided trade.