Gold Chart of The Week

Each Week Longleaftrading.com 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 (March 18th through March 22nd)

And so it begins. The first wave of profit taking came on a Sunday night thanks to reports from Cyprus that banks may begin taking money from accounts to help satisfy debt. While the final vote on its implementation has been postponed until later today, the news alone of banks seizing money from account holders at will was enough to have not only European investors concerned, the worry carried over to markets globally.

At this point, what I understand is the vote today would decide whether the banks in Cyprus will use funds from deposits and give the account holders shares in a future Natural Gas project. The funds will initially be used to help pay down debt from a prior bailout, and once the Natural Gas project begins to make money, the shareholders will own stock and potentially see a worthwhile return.

The reason the market is reacting in such a way is because articles are already being written about whether or not this is a small test to see how the rest of the world would react. If this vote goes through and the bank takes funds from deposits and replaces them with shares in a future project, then other banks that are in debt may look to do the same. And we all know how many countries around the globe are in debt these days.

I can say I am not surprised that the first significant pullback came on a Sunday night after a report from across the pond. Trend reversals usually need one good story or event to get things started. I also am not surprised in the timing as many of the quarterly traded futures contracts are being rolled from March to June. The question now is whether or not this pullback will continue.

At this point it is too early to say whether the stock markets in the US are doomed or if this is the beginning of a major correction, but it is worth noting. My focus this week will be to keep an eye on the stock indexes, but keep a closer watch on the markets that would benefit from the profit taking in stocks. I will be watching the following markets to rally if the S&P, Dow, and Nasdaq continue to slide: Gold, Silver, Japanese Yen, Bonds, and the British Pound.

If and when hedge funds take profit on their long positions in the stocks, they will be looking for markets that appear to be a bargain. The Japanese Yen and the British Pound have been crushed over the last several months, the Gold and Silver have been VERY quiet lately, and the Treasury Bonds are always attractive as the FED maintains their QE stance. So while most traders may be looking for potential spots to sell stocks, I plan to use the stock direction as an indicator to potentially enter markets that would benefit from a drop. If the stock indexes do not continue last night’s slide, then shorter term trades would continue to be in order.

The April Gold chart shows the market climbing back into the range identified by the blue trendlines, but the rally is still suspect in my mind.  Prices between 1615 and 1620 dollars an ounce will have my attention as the short term target. Failures here would prove that Gold is not yet ready for a breakout. If Gold can prove strength by closing above this level, I would be very interested in a buy and hold trade.

Good luck this week and as always, feel free to contact my office directly with questions or comments regarding this report. I can be reached by email at bbooth@longleaftrading.com or by phone at (888) 272-6926.

Thank you for your interest,
Brian Booth
Senior Market Strategist
bbooth@longleaftrading.com
888.272.6926

** There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data contained in this article was obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Information provided in this article is not to be deemed as an offer or solicitation with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this article will be the full responsibility of the person authorizing such transaction.

10 thoughts on “Gold Chart of The Week

  1. I'm just waiting to see what the chart tells me. When gold breaks out of the trend lines you've drawn, I'll be looking to buy or sell depending on the direction of the breakout. I'll have a lot more conviction on the breakout if it is supported by an inverse move in the dollar and/or better than average volume. Fortunately, the channel is narrowing, so we shouldn't have to wait long. Like the author said, if the market moves lower then the move to a safe haven could be the impetus for a breakout to the upside. I'm just concerned that gold may have to breakout in the face of a strengthening dollar. Of course I could just be overthinking it and giving myself some analysis paralysis 😉

  2. It's a good contrarian bullish sign when the guys who have been wrong all the way down, are now waiting to short on the way up.

  3. SOME SHORT TERM RELIEF RALLY UP TO 1620 TO 1650 IS QUITE POSSIBLE, BUT IT WILL BE A TECHNICAL BOUNCE ONLY, MAIN TREND REMAINS BERISH AND WILL BE CONTINUED DOWN AGAIN.

    1. Looking to short a bounce in GLD to 159, or so, when it starts to roll over looking for a break of the 150 level.

      1. sorry but i cant understand what is 159 and 150, what you want to talk? please
        give some specific details of these levels

        1. GLD is one of the widely followed ETF's for gold. The fly in the ointment which may propel gold higher toward 1680-1700 or higher is the wave structures on the currencies many of which point towards a setback in the dollar quite soon.

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