Can Gold Prices Hold the Recently Achieved Lows

July 5, 2017 - 5:35pm

 by Gary Wagner

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,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
We were stopped out of our last trade on Monday when prices droped over $20.00 
We went Long Gold Position at 1252.60, Stops were hit at 1232 for a loss of $20.00 or $2000 per contract
 
Today we sent out a trade Alert to buy gold at market

Either August Contract long at 1225, with Stop below lows at 1215 (1209)

or  Buy October 2017 Current price 1229, with Stop below lows at 1220 (1214)

 
 
Gold Market Forecast

On a technical basis it is the double bottom which was achieved this Monday that most interest me in terms of a key level of support holding. Based upon my current analysis I believe we have a substantial bottom at this price point and a substantial opportunity along with that.

Over the remainder of the week I will talk about rationale behind placement of our current stop and most importantly are exit strategy.