Chart of the Week - Gold

Each week 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.

August Gold Futures This Week

 As last week inched up onto Friday the 13th, even the traders that do not consider themselves superstitious were feeling a bit apprehensive about market direction. Many of the major global markets traded in ranges, but overall did not show much promise for anyone hoping to confidently commit to a buy or a sell.

In last week’s trade, the September Euro began closing below the June low around 123.00 after Europe failed to convince anyone on the short side to even take profit until the end of the week. The US Dollar futures in September did test the high price from June around 84.00, but did not see a follow through buy to finish the week. Were it not for the recovery bounce in the markets on Friday the 13th, I would be painting a very bleak picture in this week’s review of the Gold Futures.

As far as commodities are concerned, last week brought hedge funds and speculators money in on the buy side. Most of the major purchases were seen in the Grains and some in the Crude Oil. There is speculation that China may take steps to boost growth in the markets after a string of disappointing reports. China reduced their interest rates in the months of June and July and have lowered Reserve Requirements several times since late last year, but these measures are failing to produce any major sparks likely because of the continued drag of Europe on global markets. This is why traders are keeping their eye on news out of China for any indications of further easing.

Last week, I predicted a choppy week for the Gold Futures, and the market provided exactly what I was looking for. This week however, I think may have better potential for a directional play. The reason for this is due to the fact that last week brought attention to long positions in commodities and I do not think the Precious Metals saw their fair share of buying yet.

One standout (see chart) is the Gold Markets failure to retest the triple bottom low from the month of May. Arrow #1 shows the May low and arrow #2 points out a higher low from late June. As Gold Futures probed lower in Thursday’s trade, it failed to retest the June low and reversed at a higher price as seen by arrow #3. This price action now shows an upward trend beginning at the May low prices, which should be seen as bullish for the week.

There are no options or futures expirations until next week in the Metals, so unless the lighter volume environment really comes into play, I do not suspect that there will be any major swings this week. I would like to see Gold prices closing above $1600 again this week, and would feel even better if this week could produce a close above the high price posted on July 2nd, around $1620.

Overall, I think that this week may favor the upside in the Precious Metals as commodities are experiencing an increase in net long positions. After last week’s choppy trade and the Gold Future’s failure to retest chart lows on Thursdays drop, there should be enough reason to scale into the long side of Gold on pullbacks.

If you have any questions or comments, please feel free to contact me directly at my office email [email protected] or by phone at (888) 272-6926. I will be happy to hear from you.

Thank you for your interest,

Brian Booth

Senior Market Strategist

[email protected]


4 thoughts on “Chart of the Week - Gold

    1. Terry,

      Todays action was interesting. I remember a day just like today on the last trading day in February, when Ben Bernanke annnounced similar news to today's, and the Gold Futures collapsed. The announcement today did not suggest and further easing, but there was mention that the FED continues to watch with a finger on the proverbial trigger. The only problem is, we are not sure what type of gun or bullets the FED has left to utilize.

      I suppose that explains why we are mid range to finish up the day today, there are many questions still lingering after todays testimony. I did note however, that todays low came right in line with a dominant trendline. If you drop a straight line from the March 1st (first day after the late Feb drop) across the dominant highs over the next few months, the line ends right on todays low. I think as long as the market is showing higher lows since the May "triple bottom", that Gold still stands a chance for a rally. If not, traders will have to wait to see if $1530 can once again hold.

  1. As long the Fed keep manipulating gold this commodity will remain flat, this has been happening for a long time already, but gold still holding it's ground, everything has a begining and a end, inflation is showing his face WE CAN SEE IT easier and easier, even the fed is manipulating it too changing the rules of how to mesure it buy the old rule of the 1990th it should be arround 14 %. Do not trust me check it out yourself. The same thing is happening with unemploiment.
    Sooner than latter this will become unsustanable, the congress needs to investigate what's going on with the Fed books and we will find out what really is going on there ( I know they already refused to allow it).
    In the long run gold up, market crash.
    Lests buy gold every time it gets 1 or 2 % DOWN.
    Good investing.

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