Gold Traders Begin the Holiday Weekend with A Christmas Rally

Immediately following the passage of the tax reform bill, gold prices showed solid support and continued to move farther away from the lows witnessed last week. Beginning on Wednesday of last week, in response to the FOMC meeting statement released by the Federal Reserve, gold prices moved sharply off of the six-month low at $1238 per ounce.

A $16 per ounce price increase was the response from traders and investors as they bought gold in response to the 2018 monetary policy laid out by the Fed. What followed over the next week of trading was strong support and higher pricing across the board in the precious metals markets.

As of 3:15 PM Eastern standard time, gold futures are currently trading at $1279.10 per ounce, which is a net gain of $8.50 (+0.068%) on the day. Silver futures are also trading higher in tandem with gold, gaining over a full percent today and currently fixed at $16.41 per ounce.

The last two weeks have resulted in back to back weekly gains, which takes the year to date gain in gold just shy of 10%. During the same period, the Standard & Poor’s 500 has gained 18.66% over the last year.

Although gold’s increase in value this year is still slightly dwarfed by gains in U.S. equities, a net gain of 10% on the year is still respectable inasmuch as from 2011 to 2016 gold pricing exhibited a yearly decline of value. This gives credible technical evidence that the sustained correction, which began following gold’s rise to $1900 per ounce and subsequent fall from grace, has concluded.

Pop Pop, Fizz Fizz, Oh What a Relief It Is

For those of us old enough to remember the tagline to an old Alka-Seltzer commercial, pop pop, fizz fizz, does not refer to trading activity in the cryptocurrency, Bitcoin. However, for those too young to remember this commercial, this tagline could easily refer to the bubble that burst in Bitcoin trading today.

It must be understood that this market’s volume is composed of 99.9% cash sales, with the new futures contracts introduced by the CME and the CBOE providing very little liquidity and an incredibly small volume.

Another facet of these futures contracts is that there are no price move limits on the CME’s single Bitcoin contract, whereas the CME has limit moves which will in essence shut down trading if the move exceeds the limits. Many traders, including myself, have been extremely bullish overall on the long-term value of Bitcoin but believed that current pricing was undoubtedly in a bubble, and it was only a matter of time before that bubble burst.

So, the question becomes whether or not the recent prices advance to $20,000 per Bitcoin and fall from grace to an intraday low of 11,000 is the bubble bursting. Considering that the rise to 20,000 and the subsequent meltdown occurred in under ten trading days is remarkable.

Regardless of where the cryptocurrency trades from here, one thing is for certain -- next year promises to contain more volatility which equals more opportunity.

Most importantly, I want to wish our subscribers a blessed holiday season and to wish you as always, good trading,