Gold Takes a Needed Consolidation and Correction After Respectable Gains

June 10, 2019 - 6:43pm

 by Gary Wagner

On February 20 of this year gold pricing peaked at $1350 per ounce, the highest value gold has achieved this year up until recent action. For almost 5 months following the highs achieved on February 20 gold prices methodically and slowly corrected, giving up roughly 50%of the gains that were achieved from October 2018 until the middle of January.

On that particular rally gold prices moved a total of $150.00, taking gold from just under $1200 per ounce to $1350. What would follow was gold prices giving back approximately $75 until it reached a triple bottom at approximately $1270 per ounce.

The first bottom occurred on 23 April, the second occurrence at this price point was seen on May 2, and the final attempt to breach those lows occurred on May 21 when gold hit these lows for the third and final time.

From the end of May to the beginning of June gold pricing remained in a tight and narrow range, with highs just around $1290 and a series of higher lows just above the prior triple bottom at $1270.

On May 30 the market would finally close fractionally above the tight trading range, which was followed by a tremendously large upside spike which occurred on the May 31 taking gold from approximately $1295 up to $1310 per ounce.

What would follow was six consecutive trading days which could best be characterized as strong moves to the upside containing a higher high and higher low than the previous day. This allowed market forces to carry gold prices to an intraday high of $1352 on Friday, a new record high for 2019.

The majority of this move was predicated on a couple of factors. The predominant factor was last week’s comments by Fed Chairman Jerome Powell, and Fed President of the St. Louis Federal Reserve Bank suggesting the validity of a series of rate cuts be put in effect this year. In fact, by the end of the week the market was factoring in a total of three rate cuts to occur in 2019.

The other factors contributing to this rally was the trade war between the United States and China, as well as the recently proposed tariffs on Mexico. In an 11th hour deal, negotiations between the United States and Mexico proved fruitful and resulted in the alleviation of a 5% tariff that would have been implemented today.

This was the type of news that gold traders needed to hear in order to have a solid rational reason to take profits on their most recent gains. This was not only warranted but healthy when considering the rally that preceded.

Today August gold futures are currently down by $14.30 and fixed at  $1331.80. Now the question becomes where will gold pricing once again find support, conclude the current correction and begin to once again trade to higher pricing.

Based on our technical studies the first level to start to look for potential support is $1320 per ounce. This is based upon a Fibonacci retracement of the most recent rally beginning at $1265 and terminating at $1352. Below that is a 50% retracement at $1310, and finally the .618% retracement at $1300 per ounce.

It is my current belief that this correction will be shallow and short-lived at best with gold prices trading to one of the price points mentioned above.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
 
We are currently flat after taking profits yesterday. On opening weaknees, when gold was down $8.00, we took our stop to the market.. Long @ $1293.10 Out @ $1338.10 =  $45.00 per ounce, or $4500 per contract.
 
Thursday morning, May 30, we sent out this message -Trade Alert: buy August 2019 gold @ the market. Respectable move today in gold which is currently trading up $6.80 to $7.00, basis the August 2019 contract and fixed at $1293.10.
Gold Market Forecast
We remain bullish for gold on a long-term basis, however Sundaywe got the short term pause in this rally we have been waiting for..  
 
Support for gold continues to be  attributed to statements by Federal Reserve Chairman Jerome Powell who alluded to the potential for rate reductions this year to continue the economic expansion. This coupled with last  Monday's statement by the president of the St. Louis Federal Reserve Bank, James Bullard is significant in that it illustrates real support for rate cuts if needed. Last weeks Labor department Jobs report came in well under exceptions. 175,000 new jobs were forecast and the actual number was only 75,000, are supportive of rate cuts.
Sentiment Indicator:
Gold -> Neutral
Silver -> Bearish
S&P 500 -> Neutral
Bitcoin -> Neutral
Bitcoin fundamentals by Joseph M. Wagner II:

Bitcoin prices have stabilized somewhat and art trading in a narrow range between $7500 and $8000. After two months of elevated trading volume in the CME, volume has dropped back down to normal levels seen over the last year excluding April and May.

The recent drop in trading volume is coupled with a gap down between Friday’s close in Monday’s open, this is the first occurrence of such a downside gap for over six weeks after it showed a gap down on May 6 which was preceded by another six weeks of upward gaps.

Although pricing opened below the .23% retracement of the most recent rally it is trading well above it at approximately $8000 on a technical basis the bulls nor the bears have complete control of the markets, although The bulls do have some technical indicators on their side with all major moving averages (50,100 and 200-day) well below current pricing in fact the 50-day MA is $1700 below current pricing. The 50 –day MA was acting as critical support from February 10th up until the huge upside spike that occurred on April 2nd.

Another note on moving averages is that the 100-day is approaching the 200-day which would form a golden cross and put all MA mentioned in true bullish formation meaning the longest or 200-day on bottom, the 50-day on top with the 100-day in between the two. A quick look at the RSI reveals it is still close to being over priced at 61 on the RSI.

With mixed technical indicators I would have to be neither bearish nor bullish on BTC futures for the time being. On a fundamental front although there is a positive note coming out of an announcement by Microsoft which states that they will be adding Blockchain tools to its power platform. This is not the first release by Microsoft of a block chain powered tool last May the company debuted Azure, a development kit for the Ethereum block chain. Also in May Microsoft announced onset of a decentralized identity network atop the Bitcoin Blockchain.

If we look back to May pricing in BTC we can see that pricing surged that month and big tech using, adopting and creating platforms that work off of block chain surely helped the rise in price in the month of May. Since this announcement earlier today BTC futures came well off of their lows although how much of a boost this will give BTC is still an unknown as it is more intertwined with ETH whose pricing rose today nearly twice as much as BTC.