Their back, gold bulls return with a mission, to take gold higher
Their back! Beginning at the end of March, when gold bulls witnessed gold prices continue to trade lower, hitting a bottom at $1640 there was an air of pessimism that surrounded them. Although gold began to trade-off of those lows by the end of March, gold retested the lows at that price point creating a double bottom.
Considering that the market had been in a deep and defined multi-month price decline after hitting the all-time record high of $2088 in August of last year, market participants witnessed approximately a $500 decline. Concurrently data was suggesting that the economic scenario following one of the worst recessions the United States has witnessed were shifting. Employment numbers were gaining strength, the GDP was growing and cryptocurrencies were in a massive bull run.
However slow and steadily gold prices began to climb from the low of March 31, which came in just below $1680. In the case of the current rally there was no parabolic move. There was no single moment when traders witnessed the beginning of a long and sustained rally. Rather the rally that is currently underway occurred as a series of stair steps in which gold prices would gain value which would be immediately followed by sideways action in which gold would form a base at the new and higher price point and on some occasions decline slightly. However, slow and steady may not be the best way to describe a market which is gained just shy of $200 in the last two and half months.
There were a few exceptional days in which we saw gold rise in double digits, and today was one of those days. Make no mistake there were outside markets that had minor influences but the overwhelming force driving gold prices higher work traders and investors buying the precious metal.
As of 6 PM EST spot gold is currently fixed at $1866.20. The screen-print of the Kitco gold index is a snapshot of prices that were taken at 5 o’clock. Gold was trading approximately $0.40 above current pricing at $1866.40. Although there were fractional tailwinds provided by a falling dollar that only amounted to gains of $2.20. The additional gain of $20.30 was due to traders bidding the precious metal higher resulting in today’s gains of $22.50.
Gold futures basis, the most active Comex contract, posted a gain of $29.00. Today’s $29 gain took the most active futures contract to $1867.60. Today’s gains indicate that gold at least for now, no longer remains range bound and has broken above its strong resistance level which occurred at approximately $1852, the 200-day moving average. The significance of that move is that market technicians view a stock or commodity above the 200-day moving average as in a long-term bullish trend and below that moving average in a long-term bearish trend.
While I doubt there are champagne bottles popping throughout trading houses and investment firms, there is a reason to rejoice for those gold bulls that have waited for a sign that the long retracement truly ended in March with a double bottom formation and now has a realistic probability to once again challenge $1900 per ounce
Wishing you, as always, good trading and good health,
Gary S. Wagner - Executive Producer