Can Gold Prices Hold the Recently Achieved Lows
After sinking to a three and a half month low, gold prices are attempting to stage a recovery. On Monday of this week, gold experienced a price drop of approximately 1.9%, which is the largest single daily drawdown for 2017. Market sentiment which saw a more hawkish Federal Reserve and a robust equities markets were cited as contributors to this $22 decline in gold prices.
Geopolitical hotspots such as North Korea, along with a more dovish tone from the Federal Reserve, have helped to moved gold off the intraday lows achieved recently at just above $1215 per ounce. Just as the last attempt to break above $1300 created a double top, the recent decline in gold prices have created a double bottom, assuming that these lows hold.
The most active August 2017 gold futures contracts settled up $6.60 to close at 1225.80. This upside move is in response to weak U.S. economic data as well as ballistic missile tests by North Korea.
As reported by Kitco News in a Seeking Alpha post on Wednesday, Lejun James Shao said, “I am now making the call for a gold bottom. Gold’s key support level right now lies at $1,200 an ounce and below that, at $1,190. But I have reasons to think that gold will not fall below its current support and will rebound from here,” Shao added that the U.S. dollar, which has been weighing on the yellow metal, might not be of much concern either.
After failing to find support at the $1230 level, this most recent decline in gold prices might, in fact, provide an opportunity for investors. On a technical basis, it is the double bottom that is most insightful. However, after failing the last potential recovery and trading dramatically lower on Monday only time will tell how this unfolds.
Wishing you as always, good trading,