The Running of the Bulls

July 7, 2017 - 6:59pm

 by Gary Wagner

The famous “Running of the Bulls” is part of a nine-day festival held in Pamplona, Spain. This annual event, which began yesterday, is composed of thousands of people who risk their lives to run with the bulls, or more correctly, to run ahead and faster than the bulls.

Thus far, a total of three individuals have been gored, two Americans and one person from Spain. However, the “Running of the Bulls” that I am referring to has nothing to do with Spain and everything to do with gold traders. In this case, bearish market sentiment has wreaked havoc amongst gold bulls, as they run for cover to protect themselves from being gored monetarily. The bearish faction has been dominating price action as the bulls in this instance run for cover.

Ever since gold failed to break above $1300 during the first week of June, gold prices have been steadily declining. That market top also matched a failed attempt to trade above $1300 during the middle of April, creating a double top.

The price decline which began in June was in response to a more hawkish tone by the Federal Reserve and the European central bank, as both entities begin to wind down their quantitative easing programs. The monetary stimulus, which was a direct result of these programs, has run its course.

It is this collective shift by global central bankers that has resulted in the bearish market sentiment that has emerged by market participants.

This week selling has accelerated at a much quicker pace. On Monday of this week, gold prices dropped over $22, which was the single largest price decline seen this year. Today gold closed $12 lower, and the August futures contract settled at $1211.40.

Today’s $12 decline was in response to a strong jobs report, which increases the probability of higher interest rates this year. In an interview with MarketWatch, Naeem Aslam, chief market analyst at ThinkMarkets UK said, “The U.S. nonfarm-payrolls data “brought negative news for gold traders as the number from the outset looks acceptable. There isn’t really anything in this number which is going to put the brakes” on the Federal Reserve’s plans for more interest-rate hikes this year.”

While, on a technical basis, it seemed probable that gold might form a double bottom at the recent lows, the fundamental factors influencing the market dominated market sentiment. At least for this year, the running of the bulls is not limited only to Pamplona, Spain.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

We will enter the weekend with no active trades after being stopped out today.

We went long August Contract at 1225, and stops were hit at 1209 for a loss of $16.00 or $1600 per contract
 
Gold Market Forecast

Bearish sentiment which was the overall market characteristic drove gold and silver prices dramatically lower on the week. Both gold and silver close below a critical support line, and as such could indicate major technical chart damage. Depending on how the precious metals trade at the beginning of next week will determine if both gold and silver pricing are able to move back above that support line, or if more price decline is in the cards.