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 (September 16th through September 20th)

Out of the fifty-two weeks each year, this upcoming week is one that I personally look forward to the most. Since the financial crisis several years ago, this week has been a standout year after year. There are several reason for all the hype, which I will share in the next few paragraphs.

First and obviously most important is the fact that the September FOMC Policy Statement is shared on Wednesday afternoon. We will hear about the FED’s decision on Interest Rates and whether or not they plan to taper their Bond Purchase Program (QE) from 85 Billion, or if they feel it is necessary to stay the course. Without having the ability to sit in this important meeting, traders will either begin speculating on the outcome before Wednesday afternoon, or they will keep the proverbial powder dry until after the announcement is made. Either way, I expect steady volume to return to the markets leading up to, and after Wednesdays disclosure.

Anyone that has traded in the past is aware of the leaner volume, Summer trading that we experience each year. Many markets experience this from June through mid September when fund managers in both the US and Europe take advantage of the opportunity to take time off from trading. Often times, Central Banks and other governing bodies will refrain from making impactful and economically driven policy statements until after Labor Day, which brings us into this week.

Even though the United States is no longer the only game in town when it comes to QE, the world still waits on baited breath when Ben Bernanke releases the minutes from this months FOMC. The decision on Interest Rates and Bond Purchases affects economies around the globe as traders and investors will have to adjust positions and strategies, based on the final outcome. Additionally, we expect a steady flow of sidelined and new money to return to all markets once the news is released.

Every year in this week, I think of the old idiom, “You have to make hay when the sun is out”. I feel that it is applicable in the trading world because once this news is released, we should have enough information to predict many multi-day trades. After the Summer lull, which required a faster paced, day-trade game plan I look forward to a higher volume and more reliable trade. As investors and traders adjust old positions and add new positions beginning Wednesday afternoon, we stand ready to “make hay when the sun is out”. So for those of you who have any intention of getting involved in the fourth quarter of this year, I would suggest that now is the time to have your technical analysis prepared and have a plan in place.

We have seen the Gold Futures market behaving much like the Gold of years past, and moving inversely of the stock indexes. When the US stock indexes are under pressure, the Gold experiences a “flight-to-safety” bid. Conversely, when the stock indexes are strong, we see Gold retreat.

I expect this relationship to continue after Wednesday. In most of 2012 and some of 2013, Gold Futures were hell bent on correcting and multi-year move higher. There were days when the Gold traded lower no matter what was happening in outside markets. But in the past few months, we have seen some of the relationships return to Gold prices, and if the “flight-to-safety” relationship is here to stay again, I am fairly certain that Metals traders will be relieved.

I plan to hold out on any new positions in Gold until after the FED announcement. Once the news is released, I will see how the Gold Market reacts to the news and to the direction of the US Stock Indexes. From there, I will rely on the daily chart of Gold Futures to direct me on the entry and exit points of the markets.

If you would like to discuss trading in the Futures and Futures Options markets with me, please feel free to call or email me directly. You can reach me directly at (888) 272-6926 or by email at [email protected].

Thank you for your interest,
Brian Booth
Senior Market Strategist
[email protected]

** 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.

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