Gold remains volatile, trading down in double-digits and reversing to close higher

It is been another extremely volatile day for gold futures. Beginning from the opening Monday morning in Australia, roughly 22 hours ago, we have seen gold futures basis the most active June contract trade as low as $1724.20, which was a double-digit decline on the day. As of 4:20 PM gold futures are currently up $12.40, which is a net gain of .71%, and fixed at $1765.10.

At 12 noon in Honolulu Hawaii, which corresponds to the opening Monday morning in Australia, we saw gold prices open and trade fractionally higher before succumbing to profit-taking which took us to the intraday low of $1724.20. It was buyers entering the market taking gold to $1741 that prompted me to raise our protective stops yesterday, while we maintain our long position which we entered on April 1 at $1602.

Although equities globally were weaker but mixed, it was the decline of U.S. equities today that aided in supporting higher gold pricing, as the precious yellow metal continues to act as a safe haven asset. Silver was the only precious metal (gold, silver, palladium and platinum) of the futures complex to close lower on the day. Quite likely reacting to lower equities pricing in the U.S. as silver’s industrial component drove the precious metal down by 2.39%, and after factoring in today’s drawdown of $0.38, silver futures are currently fixed at $15.67 per ounce. Platinum gained almost ¾ of a percent, and palladium gained almost 8/10 of a percent on the day.

On a technical basis we see major support in gold at $1697 to $1700, which is the 38% Fibonacci retracement of the last leg of this rally which began on April 1 when gold traded to an intraday low of $1576, up to today’s high of $1771. There is also support at the 23% Fibonacci retracement level which occurs at $1726.

More importantly in terms of technical areas we might find resistance there is a void when we look at the historical data going back to the middle of 2011 when gold prices hit the highest level on record and then began to oscillate between $1800 and $1537 per ounce. Simply put on a technical basis there is no real strong level of resistance until $1800 which was the ceiling from the end of 2011. Although there is a lot of historical data between 2012 up until the end of March 2013, there is virtually no technical resistance between the current price of gold and $1800.

Fundamentally recent action by the current administration with their payroll loan guarantees, and the Federal Reserve’s action of cutting rates to near zero and simultaneously adding to their balance sheet to accommodate their revised monetary policy of quantitative easing are all adding up to a solid rationale to see gold move higher.

Wishing you as always good trading,