Will The Fourth of July Signal a Rally in Gold
Following the Fourth of July holiday, gold futures opened at $1,253.50 and traded higher, reaching $1,257.80 as of 4:45 PM Eastern standard time. Today’s price gains were a combination of a weakening U.S. dollar along with traders bidding up the precious yellow metal.
Today the Federal Reserve released the minutes from the June FOMC meeting after the Comex exchange had settled for the afternoon session. The minutes conveyed that the Fed would not deviate from its current monetary policy indicating that the number of proposed interest rate hikes would remain the same.
The current trade dispute between the United States and China, Canada, and the EU remains entirely in play as proposed tariffs could take effect in less than 24 hours. Chinese officials cautioned that the U.S. tariffs on Chinese products could “potentially ripple throughout the globe.”
In terms of our current trading status, we initiated a short position in August or October gold on June 26. Our entry price for the August position was $1,260.80. Initially we placed a protective stop at $1,272 per ounce. We then raise that stop to $1,259 per ounce.
Our initial target was based upon the lows achieved in December and January, which resided at $1,238 per ounce. On Monday of this week, gold traded to a low of $1,240, and then on Tuesday came within $0.80 of our target when it reached a low of $1,238.80. The high on Tuesday was $1,258.50.
This prompted us to send out a special trade alert recommending that all traders cover (offsetting the short position with a buy) their short positions when the market opens immediately after the Fourth of July holiday. Today Comex futures opened at $1253.50 which is effectively where we are marking ourselves out of the trade.
The question now remains as to whether or not gold will find support at this price point and begin to trade higher or form a base and trade sideways before moving to a new low.
Currently, it is our belief that we should get some sort of upside bounce on a technical basis after such a steep and rapid decline in pricing. However, because the jobs report will be released tomorrow, we are hesitant to issue a buy signal until that report comes out and then act accordingly.
Wishing you as always, good trading,
Gary S. Wagner - Executive Producer