Gold Attempt’s to Find Footing and Price Support

Considering the recent rally in gold pricing which in essentially began in the middle of November when pricing was about $1200 per ounce, and its recent surge to $1300. This most recent decline can be put in the context of either a simple shallow retracement, or the beginning of a much deeper correction.

So the question becomes, was the recent decline in gold a consolidation/profit taking or an indication of lower pricing up ahead. Although that question can only be answered as more data is presented to us, there are some observations that we can use to gain a feel to what is the most likely outcome.

First off, there seems to be strong resistance for gold pricing at approximately $1300 per ounce. After challenging that price point on January 4^th when gold when on an intra-day basis reached $1300.40. Since then it has not been able to retest that elusive  price point.

Secondly, the support level that we identified at $1275, which was near the low achieved today, seems to be indicating that this is still a major support level.

Third, although moving averages are lagging indicators expressing price movement that has already passed. Today we identified a golden cross, a point in time in which the short-term 50 day moving average has crossed above the longer-term 200 day moving average. On a technical basis this is absolutely significant and indicates the potential for gold to find solid footing here and trade to higher ground.

Given that there has been a partial government shutdown for over 31 days now, it seems gold has not been benefiting as a  safe haven asset. However, it is reacting to the nuanced changes witnessed in the current negotiation between the United States and China as they attempt to come to a resolution in regards to the current trade dispute/war.

Gold futures are trading fractionally higher on the day, with the February Comex contract currently fixed at $1283.80, a net gain of $1.20 on the day. This gain is partially based upon renewed tensions which are growing following reports that the meeting with China officials and the United States, has been canceled by the U.S. It is widely accepted that the continued trade dispute has a profoundly negative impact on the global economic Outlook.

As reported in MarketWatch “U.S. officials canceled preparatory trade talks this week with two Chinese vice ministers, ahead of a higher-level meeting in Washington later this month, according to a Financial Times report. The countries face a March 1 deadline to reach an agreement on trade.”

Today’s risk off environment with weaker equities are also supportive of higher gold prices.

Wishing you as always, good trading,