From the Trading Desk
The year has kicked off with some fireworks… not so good if you’re long equities, but at least gold has started things off in positive territory. On Sunday night the Shanghai Composite Index dropped 7%, triggering a “circuit breaker” that suspended equity trading nationwide. The heavy liquidation was attributed to the People’s Bank of China setting the daily reference rate for the renminbi below 6.5 CNY-USD for the first time in four years. The selling pressure carried over to the US session and the Dow traded down over 400 points at one point. In the face of global equity uncertainty, gold bucked the trend and was able to attract bids. It is still struggling with the $1,080 area though and gold has found steady offers to push it back below it over the last two trading days. With the 50 day moving average at $1,084, this is becoming an even more significant resistance level now as well. Look for rallies to be sold while cautious longs will look to establish positions ahead of support at $1,060.
Trading gold today was like watching paint dry. It did absolutely nothing all day despite the dollar strength. We are ramping up for something and we have conflicting information. Fear via the VIX is down again. Dollar is up. Stocks weak. Gold not breaking lower under $1,500. Silver hanging around its resistance of $14. We’ve been through this before and no matter what the short term move is, we are headed lower, under $1,000. Dollar is moving past 100 again and this time we will see Euro come to parity with dollar.
The way gold acted today with dollar up is bullish in my book. I still have to lean this way.
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.