Gold Falls Twenty-Three Dollars from the High Achieved on Monday

May 17, 2019 - 6:25pm

 by Gary Wagner

It was another brutal day for gold prices. Gold futures basis the most active June contract opened at $1285.80 this morning, and after trading to a low of $1274.60 it closed $8.50 lower and is currently fixed at $1277.60. The dollar provided moderate headwinds, as it gained 0.19% in trading today. However, when you consider the decline in gold today resulted in a 0.67% drop in value, selling pressure accounted for most of today’s drop.

Similar results were seen in the cash market today with gold losing a total of nine dollars, which can be broken down with a - 0.2% (- $2.60) decline due to dollar strength, with the remaining – 0.50 % (-$6.40) a direct result of selling pressure. This according to the KGX (Kitco gold index).

One interesting component of today’s activity in the financial markets was the renewed concern about the Chinese and United States trade war deepening. This concern was a primary cause of today’s selloff in U.S. equities. At the same time a dramatic selloff in gold continued disregarding that concern and focusing on strong economic data.

As reported by TheStreet, “Stocks ended a rocky day on a sour note Friday following a report that the trade talks between the U.S. and China had stalled. The talk break-down is a result of the two sides not being able to agree on what to negotiate, leading to uncertainty about when the next round of negotiations will take place.”

Today the University of Michigan’s consumer sentiment index for May revealed a
15-year high. Currently the sentiment index is at 102.4, versus April’s numbers which came in at 97.2.  It seems as though market participants decided to focus on the positive economic data and disregard the concerns that moved U.S. equities lower.

According to MarketWatch, “The Chinese government and state media sent a clear signal to markets Thursday and Friday that it is reluctant to resume trade talks with the U.S., when a spokesman for the Ministry of Commerce called the Trump administration’s moves to raise tariffs last week, and the threat of additional tariffs on the roughly $300 billion in annually imported Chinese so far untouched by new duties, “bullying behavior,” that has resulted in “severe negotiating setbacks”.”

This dichotomy of how traders reacted in equities, versus how traders reacted in gold was certainly noteworthy. What is crystal clear is that gold was unable to breach the barrier and resistance at $1300 per ounce after achieving it on Monday of this week and opening near that price point on Tuesday. The fact that gold breached $1280 today is also significant in that that price point represents a decline of .618% of the recent rally which began after a double bottom formed during the last week of April. It is for that reason that we could

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

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Bitcoin’s Brief Sell-Off - by Joseph M. Wagner II

Bitcoin Is trading dramatically lower today after a large sell order originating in Luxemburg sparked a sell off  resulting in a nearly 10% decline in pricing. According to CNN, “Bitcoin’s mammoth rally suffered a devastating setback on Friday when a $35 million sell order triggered a vicious flash crash on Bitstamp. By the time the dominoes had stopped falling, the bitcoin price had plunged as low as $6,894, and more than $32 billion had vanished from the crypto market cap.”

As of 5:00 PM EDT BTC futures are trading down by $760 at $7115 on the CME. On an Intraday basis BTC dipped down to approximately $6300 before quickly recovering back above $7000. This sell-off today reinforced that support still stands at $6424 the .618 percent retracement, and as we spoke about earlier this week. BTC futures did in fact “fill the gap” and traders waiting to buy on a dip got an opportunity albeit a brief one.

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Gold Forecast: Proper Action
We are currently flat with no active trades.
 
On Sunday, May 5th, we sent out a trade alert to enter a long trade in June gold. We entered this position at $1285 with a stop at $1268. Wednesday we sent out a trade alert to modify the stop to $1291.13. That stop was hit yesterday, resulting in a profit of $613.00 per contract.
Gold Market Forecast

Today's sharp decline of $8.80 certainly indicated strong resistance at $1300 per ounce. More so our technical studies suggest that gold could trade to a low of $1275, the .78% retracement  per before finding support and returning to a bullish demeanor.However if prices break below $1267 the low of the double bottom, all bets are off.

Sentiment Indicator:
Gold -> Neutral
Silver -> Bearish
S&P 500 -> Bearish
Bitcoin -> Neutral