​Gold Prices: Moving Higher or Taking a Break?

Ilan Levy-Mayer  |

Gold futures have moved up over 10% since its July 7 close at $1214 (basis Dec.). There are more than a few forces traders have attributed to this price increase:

  • The still-existing correlation with a weakening U.S. dollar
  • Geopolitical tensions – see North Korea
  • An upward technical break-out
  • Adherence to its historical seasonal pattern (5- and 15-yr. pattern: see chart B)
  • Perhaps some uneasiness with the rise of crypto currencies – see Bitcoin

Since its Sept. 7 high close of $1354 and the next day’s intraday high of $1362.40, Dec. gold has pulled back to the mid-$1320’s. This could be due in part to a decrease in apprehensions related to the pause in North Korea’s weapons testing. It could be read as a simple retracement from the recent technical wave (see chart A).

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While I am more of a technical trader by nature, I think the immediate future of gold prices will depend on the news. My guess on this one is that gold has not let go of its concern with the current geopolitical tensions, but the longer turmoil exists without any real resolution, the more unconcerned gold will become.

One as-of-now secondary factor to watch is growth of crypto currencies and narrowly, Bitcoin prices. I am still trying to make up my mind as to which camp I belong on the matter of Bitcoin. . I feel Bitcoin has taken over some of the safe haven status of gold, so if Bitcoin’s loses meaningful value, gold will be recipient of price gains.

From the technical perspective, let’s look at the daily chart below (Chart A).

We can see that prices respect the support and resistance levels drawn in the chart. $1366 is still the immediate resistance while $1318 is still the short-term support. One can also see that the top indicator (Fisher Inverse) is overbought and turning down. The big question: is this just a normal pullback of an up move or is this a reversal? As long as we can hold above the $1300 level my vote is to look for the ladder.

FYI the highs from last year are at 1377.5

The bottom line on this one is YOUR point-of-view on gold. The recent moves and volatility present different opportunities and risks. My opinion is that over the longer term, gold is taking a small break and will make another run towards the $1377.5 highs.

If you are not familiar with the risks associated with futures trading and/or options on futures, I recommend you visit our broker assist services and get help creating a trading plan.

Chart A

Chart B

Disclaimer - Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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