No Time Off for the Precious Metals

According to Bloomberg News, about 42% of American employers will close on January 15 in observance of Martin Luther King’s birthday. U.S. equities are also closed for trading today in observance of this holiday. Although U.S. equity futures are trading higher, officially the market is closed.

The same cannot be said for the precious metals markets and currencies. They have traded briskly with a lower dollar providing strong tailwinds, taking gold to the highest level it has traded in the last five months.

As reported in MarketWatch, “The metals rose as the dollar tanked, with the ICE U.S. Dollar Index DXY, -0.53% down 0.6% at 90.48, moving around its lowest level in three years. Dollar-denominated commodities such as gold and silver tend to rise on the back of a weaker dollar, because they get cheaper to buy for other currency holders.”

This rally, which began on December 12 of last year when gold prices touched $1238 on an intraday basis, has now gained over $100. Today, gold futures are trading at $1340.50, which is a net gain of $5.60, resulting in a $102.50 gain in value in just about a month.

Even more impressive is the fact that this rally is occurring in tandem with U.S. equities which continue to break records as the Dow, S&P, and NASDAQ trade to new all-time record highs almost on a weekly basis.

On a technical basis, the current level of support resides around $1327 per ounce with the next level of resistance not occurring until last year’s record high of $1362 per ounce.

What the Heikin-Ashi Chart Reveals

Another form of Japanese chart techniques is known as a Japanese average chart, commonly referred to as an Heikin-Ashi chart. This chart differs from the Japanese candlestick chart in that it uses the midpoint of the prior candle is the open of the current candle.

As such it will visually convey trend strength and momentum better than other types of charts. Over the last two trading days, the body size on the daily average charts is roughly three times the size of the candles it precedes. This indicates that the current trend building momentum and continues to have strength.

Based on these studies the probability of gold prices challenging last year’s high at 1362 are extremely high.

Wishing you as always, good trading,