Not So ?Golden? Anymore?
Today’s Spotlight Market
For those traders who really take a long view of market trends, looking at the monthly continuation chart for Gold futures, we notice that the bull market that began back in 2001 when Gold prices were just above $250 per ounce and cumulated in a rally to all time highs above $1900.00, has only retraced about 43% of the up move. It does remain a possibility that if front month Gold prices hold above the 50% retracement level of 1085.00, the long-term uptrend may actually be in a consolidation phase prior to another move upward for prices. It would take a monthly close below $1000 to increase the odds that the bull move has ended with little in the way of support for Gold prices until around the $700 level.
Fundamentals? ?When the goings? gets tough, the tough turn to Gold?? That may have been a true statement in the recent past as traders and investors would turn to Gold investments during times of economic uncertainty. However, recent geopolitical events, as well as a equity market pull-back, caused barely a upward blip in Gold prices. While Gold prices have rallied nearly $50 per ounce since recent lows were made last week at prices below $1,200 per ounce, one would have though prices would have been even higher considering a nearly 10% stock market correction in the U.S., European economic concerns, and military conflicts in Iraq and Syria. One reason given for Gold?s rather lackluster performance is the recovery in the value of the U.S. Dollar (USD). Since May of this year, the Dollar has gained nearly 12% vs. the Euro and 10% vs. the Japanese Yen. A stronger Dollar is considered bearish for commodities priced in USD, as it makes them more expensive for non-dollar buyers. Gold bulls will argue that concerns that the global economic recovery has stalled, particularly in Europe, will force the Federal Reserve, as well as Central Banks throughout Europe and Asia to maintain very accommodative monetary policies for longer than expected, which would generally be a bullish factor towards commodity prices including Gold. Market participants have now pushed back the starting date of a U.S. interest rate hike well into 2015, as the Fed Funds futures contract is now pricing a 78% chance that the target rate will be 0.25 or lower at the end of the July Fed meeting vs. a 26% chance just one month ago. While investor interest in Gold has improved based on the nearly 1.8 ton increase in gold holdings in a leading Gold ETF last week, the fact that Gold prices only saw a modest increase despite the wild price swings in equity markets, may signal that the recent rally was nothing more than a market correction in the current bearish trend that began once prices reached all time highs back in August 2011.? ?
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Gold futures, we notice the formation of a descending triangle pattern. This technical formation tends to signal that bullish demand is weakening as a pattern of lower highs shows that selling is emerging at lower price levels. A break below support seen at the horizontal side of the pattern could spark an increase in downward momentum should weak longs exit the market. Despite the recent rally, prices remain below the 20-week moving average (MA) and over $250 below the long-term 200-week MA. The 14-week RSI, while rebounding, still remains neutral to weak with a current reading of 42.10. The 1181.40 remains as support for front month Gold futures, with resistance seen at 1346.80.
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