Gold Closes Below The 50-Day Moving Average

April 5, 2018 - 6:57pm

 by Gary Wagner

Today’s decline is the result of a couple of factors, including a stronger dollar and the perception that tension has eased in regards to the trade dispute between the United States and China.

The easing of concerns about the real possibility of a looming trade war rests squarely on the shoulders of the recently appointed economic advisor, Larry Kudlow. The new economic advisor hit the ground running in his first week, tempering trade war fears.

According to Politico, “On day three of Larry Kudlow’s first week at the White House, the president’s new economic adviser did exactly what he was hired to do: go on TV to calm the stock market over something his boss said.”

In one of his first interviews as chief economic advisor, Kudlow said, “In the United States at least, we’re putting it out for comment, it’s going to take a couple months. I doubt if there will be any concrete action for several months. Trump’s putting his cards on the table. He’s standing up for this country, but he’s also standing up for better world trade.”

However, it was a statement about using the WTO (World Trade Organization) to facilitate a resolution to the trade dispute that seemed to calm traders’ nervousness. His statements allowed market participants to once again focus on a risk-on environment taking U.S. equities higher, now for the third day in a row.

These statements also put pressure on the safe-haven asset group, with gold prices trading lower and breaking below the 50-day moving average today. This technical indicator is used by market technicians to determine whether a stock or commodity is trending higher or lower. This time cycle (50-day) is considered a line in the sand when determining the short-term forecast.

The 200-day moving average is still considered the standard for determining long-term market direction. Gold has traded above the 200-day moving average since December 2018 and is currently fixed at $1,295 per ounce, which is the current major technical support level.

Gold prices closed moderately lower, with June futures closing at $1,329.90, a net decline of $10.30 (-0.77%) on the day.

Physical gold is currently fixed at $1,326.20, which is a net decline of $6.60. According to the KGX (Kitco Gold Index), today’s decline is primarily due to a strengthening U.S. dollar which accounts for $4.80 of today’s drawdown. The remaining decline of $1.80 can be attributed to selling pressure.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
We are currently flat with no active trades
On Monday, April 2,  we issued a Trade Alert: Buy Gold @ Market
Today's lower prices resulted in our stop being hit
Long gold at 1345.40 and out at 1330, for a loss of $15.40 ($1540 per contract)
Gold Market Forecast

Gold closed below the 50 – day moving average today. The low today occurred at the .618% retracement of the most recent rally. Therefore, if the low holds it would become support. If gold prices decline further 1317 would be a logical price point for support.