Approaching the Apex

Although gold is trading well off of its intraday high, the sun colored metal was able to hold onto fractional gains throughout the trading session. As of 4:30 PM Eastern standard time gold futures, basis the February 2019 Comex contract is trading up by $2.20 (+0.16%) and fixed at $1291.60. These gains are the net result of traders bidding up the precious metal, with a small fractional boost from dollar weakness.

Gold futures traded to a high of $1296.60 in trading overseas last night. It seems the elusive brass ring of $1300 on a closing basis has been a difficult target to reach and sustain. On Friday, January 4^th gold futures opened at $1296 per ounce, and then traded to a high of $1300.40. However, selling pressure moved the market lower and into negative territory trading to a low of $1278 before recovering slightly and closing at $1286.

In fact, the range created on Friday January 4^th, which was just over $22, provided support and resistance levels for the following week. Last week (January 7^th) gold pricing traded with a series of lower highs, and higher lows, resulting in a compression of range which continues to this day.

More so, the high of $1300 achieved on Friday, January 4^th has become an insurmountable benchmark that continues to challenge a bullish rally which is still intact but losing strength. A break above that price point could push gold dramatically higher as stops would be hit, and more interest and investment dollars would flow into the precious yellow metal.

Less Than Seven Dollars

Although we have written about the high likelihood that palladium prices would move to parity with gold, today’s differential has fallen under $10 with the likelihood of parity almost a certainty. Currently palladium futures basis the most active March contract is trading at $1285 up $6.30 on the day. With gold currently fixed at $1291.70 the other precious metal is only $6.70 higher per ounce than palladium.

Golds Range Compresses Further

Our technical studies indicate that Gold’s trading range that was formed a week ago Friday have now become major resistance areas. Last week’s compression of range has formed a flag or pennant formation. As current pricing continues to compress, and moves closer and closer to the apex of the triangle it is quite possible that we will see a major release of energy, resulting in a strong price break.

This type of formation can result in a sharp break to the upside or downside, however typically the market will break to the prevalent trend direction that proceeded the sideways action and compressing range. If that is the case, we can expect an upside break once pricing hits the apex, and more importantly that energy should be sufficient in taking gold pricing above $1300 on a closing basis.

Wishing you as always, good trading,