Gold Surges Closing Well Above Its 50 day Moving Average

In brisk trading today, gold prices surged and closed strongly higher. The most active December futures settled up approximately $17 on the day, and as of 3:30 EST is currently fixed at $1295.40, which is a net gain of $17.10 (+1.35%).

Spot gold is currently fixed at $1294.30, which is a net gain of $16 on the day. Today’s dynamic gain does not have a single causal point but is instead a combination of multiple factors.

U.S. dollar weakness was a small contributing factor today. According to the Kitco Gold Index, four dollars of the $16 gain is directly attributable to a weakening U.S. dollar. However, the other $12 of gains today can be attributed to multiple factors since there was not a single factor that would have moved the market so quickly.

Of these multiple factors, outside markets did influence market sentiment regarding gold pricing today, with crude oil gaining over 2% and closing at 56.58 on the day.

A continuation of the downside pressure exhibited this week in U.S. equities was also a contributing factor to the risk off environment created as the Dow Jones industrial average closed about 90 points lower on the day. Both the S&P 500 as well as the Dow lost almost 4/10 of a percent in value today. More importantly, on a technical basis, these markets have been exhibiting a rounded top as weakness crept into market sentiment this week.

There is also concern about potential chaos in the White House because the investigation into Russian collusion is still unsettled and unresolved.

It’s About the Technical Indicators

There is no doubt that today’s dynamic move is a net result of a combination of events, data, and factors that have been evident in the market for quite some time. However, more importantly, today’s upside surge can be viewed entirely as a technical breakout.

For the last few weeks, we have spoken on multiple occasions about the fact that gold prices have been exhibiting extreme and robust support at approximately $1265 an ounce, which also corresponds to the 200-day moving average. At the same time, we saw a highly defined level of resistance forming a top at approximately $1285 per ounce. This established a tight and narrow trading range that many including myself anticipated a hard break, above or below this tight trading range.

For technical traders such as myself, today we got the answer that the breakout is to the upside and in most likelihood, a strong rally will follow and gold prices will advance substantially over the next month.

Wishing you as always, good trading,