Now, Not Later

When it comes to market sentiment, many traders believe their focus should be on now rather than later. It seems the overwhelming majority believe in focusing on data and events which are influencing markets currently, rather than focusing on future events. At least this sentiment appears standard as far as the Federal Reserve is concerned.

Gold has been in a distinct and pronounced rally since the middle of December.  The last eight trading days have resulted in consecutive price gains, or at least that was the case up until today.

Immediately following the release of last month’s FOMC meeting, gold sold off quickly. The minutes revealed that Fed members were much more divided on this year’s monetary policy than initially perceived. Gold futures had been trading at $1318 per ounce and within the time span of 20 minutes fell to an intraday low of $1309.

This price action suggests that there was an immediate round of profit-taking that occurred. Just as impressive was the recovery that would immediately follow the selloff. Within the time span of 90 minutes gold prices recovered back to $1318 per ounce, the price of gold had been trading at just before the event.

This quick selloff and quick recovery could be indicating that although there was an immediate knee-jerk reaction to the news and the potential repercussions of this information. However, this information would be felt further on down the road, and there were much more pressing issues in the immediate future to focus upon.

As of 3:45 PM Eastern standard time, gold futures are trading at $1316 which is, in essence, unchanged on the day.

The facts are undeniable. Gold prices have moved up substantially from the lows achieved mid-December when they traded at $1238 per ounce. At any time, any number of events could unfold resulting in a correction in response to this recent price advance. However only time will tell if that short-term top occurred today, or if this current rally in gold has not completed its run.

Wishing you as always, good trading,