Weekly Gold Report (December 10 through December 14th)
I am not sure if I have ever been so happy to close the books on a week of trading, as I was last week on Friday. You wouldn’t think that it was that bad if you look at the daily chart today, but it was not easy to sit through either a short or a long position in the Metals last week. I will explain why.
The week began with Gold and Silver dropping below the support trendlines that were held from early November. They also were dropping alongside a weakening Dollar. I understood the selling from a technical perspective, but fundamentally I was a bit puzzled in the short term. Once support was found, Monday’s decoupling from the usual relationship to the US Dollar made holding new long positions a bit difficult. Furthermore, the rangy trade over the next four days had a “Groundhog’s Day” feel to it. It seemed as though Metals prices opened around the same price each day, closed the European Markets at the same price each day, closed the pit traded session at the same price each day, and closed the electronic session at the same price each day. Short option traders long for weeks like those, but futures traders had to be a bit uneasy. I know I was.
Looking back on the news from last week, the markets waited for any possible surprises from the Interest Rate decisions from the BOE and the ECB, but nothing unusual was decided. Rates were left unchanged and the post report interviews provided little to trade off, unless traders were involved in the Currency trade. On Friday, the United States Non Farm Payroll Report was announced with a much better than expected number of jobs created and an impressive rate, but still, there was little activity across the board. A few times last week, there were also spikes and drops across the board when politicians in Washington felt the need to interrupt business with a Fiscal Cliff update (I could probably add another 2500 words to this piece with my thoughts on this topic, but I guess I will opt to do what the politicians should be doing……zip my lip and get to work).
Lastly, who could forget last week’s early announcement from Goldman Sachs, which suggested to sell Gold? I am not sure what the overall percentage has been over the last five years, but a fade of suggestions like these from GS usually seems to be a favorable trade.
Now that we are past last week’s chop, we begin the week with a decent bid above the range. It is too early yet to guess whether or not Gold is pricing in a favorable announcement from the FED on Wednesday, but I do believe that we will hear something supportive from Ben Bernanke and Co. after the FOMC rate decision. Traders will be dissecting Bernanke’s speech for clues on the Fiscal Cliff, Operation Twist, and Interest Rates for the New Year.
The daily chart shows February Gold held the support trendline that began at the start of the last significant bull rally in July. This was an important low as the trendline and the prior low from early November came into play. As Gold tested the lows from last week, I thought that the market may have wanted to target the convergence of the 200day simple moving average and the 100day simple moving average (arrow #1) before building a base, but was pleased to be wrong. So far, Gold seems to have decent support behind it but the real test will be on Wednesday after the FED announcement. I believe the FED will provide news to drive Metals higher this week, but remain cautious in what continues to be a headline driven trade.
Good luck this week traders! As always, feel free to call or email me directly if you have comments or questions regarding the Metals or any other Futures Markets. I can be reached at (888) 272-6926 or by email at firstname.lastname@example.org. I will be happy to discuss trading and the services that I provide through Long Leaf Trading.
Thank you for your interest,
Senior Market Strategist