Gold Chart of the Week

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.

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  I will be happy to discuss trading and the services that I provide through Long Leaf Trading.

Thank you for your interest,
Brian Booth
Senior Market Strategist

10 thoughts on “Gold Chart of the Week

  1. Since last few months, i am writing again and again that with a view to Technical Situation, no more hopes remains for gold and silver.

    Bulls and Bears found in equal position, and overall picture is in favor of bears, so even any little affecting factor may also give big threat, and big big down-fall is allready designed, however, market is just waiting for any "Provideable Reason"

    1. Rasesh,

      Thank you for the comment. Our respective views on the direction of the markets, while opposing, are what keeps markets moving on a day to day basis. Good luck on your idea.

      1. Dear Brian,

        Thanks a lot for reply and also for your sporty spirit. i am delighted to agree with your view like "what keeps markets moving on a day to day basis." Majority daily movements follows rendom walk,only according to general sentiments and traders mood.

        Thanks again

  2. ciao sono un nuovo lettore e volevo una tua opinione in riguardo al reporter settimanale dei cot se si possono tenere in considerazione in riguardo alle valute grazie

    "Hello, I am a new player and I wanted your opinion about a reporter weekly cooking if you can take into consideration in regards to the currencies thanks"

    Translated using Google Translate

    1. Hello Salvatore. I would really like to answer your question to the best pof my ability, but I think something was lost in translation through Google. Perhaps you can try asking the same question another way for a better translation.

  3. Take a look at the big short JP Morgan and their bank buddies have in giant short positions in gold and silver. Please comment especially since price plunges are are frequent an last only a few minutes before recovering. Manipulation? Where is CFTC?

    1. Leo,

      Thank you for the reply. I think that the reason the CFTC is not involved is because there will always be a system of checks and balances in the markets. We saw this a few years ago when Silver was en route to $50, and the exchange raised margin requirements to put the breaks on a parobolic market rally in Silver. Keep in mind that there are major banks, hedge funds, commodity funds, etc that are trading in the market on a daily basis. They trade in a wide variety of markets and have an enormous amount of capital to do so. Their participation in the markets is important and necessary for smaller funds and retail investors, as the fund and bank participation represents a major chunk of the volume and open interest. I look at this as a plus, and here is why. If these funds and banks were to pull their money out of these markets, essentially drying up volume and open interest, these markets would have wild swings both up and down . When volume is light, it opens the door to big moves, which may be very difficult for the smaller trader and investor to handle. For the record, (in case you haven't already noticed) I am bullish Metals and think we will see higher prices again over time. I just think that we will see a much more gradual and grinding move up versus the huge spike we saw a few years ago. This type of movement is boring and time consuming for the traders looking for the immediate and huge return, but there are strategies that you can use that will help you maintain a position over time while we wait for the markets to show us something different. Feel free to email me or call me and I will be happy to discuss this with you.

  4. Hi Brian - New reader here! I just wanted to say 'thanks' for your informative post about gold. I've always been more inclined to hold gold over sell. It retains it's value even when the markets are week.

    1. Hello Mason,

      Thank you for the reply. I agree with your investment strategy and work with alot of people who are like minded. Many of them also use the Futures and Futures Options Markets to either hedge their exposure or speculate on the markets when they hit favorable prices. I would like to hear more about your experience. Please reply or feel free to contact me directly.

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