Gold and silver prices experience strong selling pressure today
Both gold and silver experienced a tremendous price decline in trading today. Gold futures basis the most active December contract lost $78.90, a total decline of 3.92%, and is currently fixed at $1934.20. Silver had a larger percentage gain giving up 4.77% which is a decline of $1.34, with the September futures contract currently fixed at $26.735.
Although a percentage of today’s decline in both gold and silver were directly attributable to dollar strength, the vast majority of today’s drawdown is the result of market participants and traders selling both precious metals taking them lower.
Spot or physical gold lost 3.68%, which is a decline of $73.63 and is currently fixed at $1928.30. We can see the two components which took gold lower today by viewing the KGX (Kitco Gold Index). The screen-print in this article was taken at 16:59 EDT when spot gold was fixed at $1727.90, indicating a drawdown today of $72.40. On closer inspection we can see that $56.80 was the result of traders liquidating or selling positions, with the remaining drawdown of $15.60 a direct result of dollar strength.
The release of last month’s minutes from the Federal Reserve’s FOMC meeting indicated that the Fed members did not see the benefits of implementing a so-called yield curve control which meant that it was highly unlikely that the Federal Reserve would Interest rates in the near future. Fed members told central-bank officials in late July that they were lowering their estimates for economic growth over the second half of the year.
As today’s minutes were released and analyzed the information was viewed this highly supportive of the US dollar, taking the dollar index higher by +0.83%. However considering that gold futures gave up 3.92%, simple math reveals that a little over 3% of today’s decline was directly attributable to selling pressure.
As reported by Neils Christiansen, editor of Kitco News, Adam Button, chief currency strategist at ForexLive said, ““The gold market clearly wants to see yield curve control,” said Adam Button, chief currency strategist at Forexlive.com. “I think this selling is a little over done but clearly the markets have a gun to the Fed ’s head. They don’t want to hear anything but printing presses. Although gold has dropped sharply Wednesday, he does not think the minutes are a game changer for the precious metals market. He cited that time and time again the Federal Reserve has shown it will do whatever it takes to support the U.S. economy.
On a technical basis it seems clear that after hitting the new all-time record high at $2088, traders perceived a market which was temporarily overbought and began to sell into current pricing. The first leg of this correction took pricing to $1875 before recovering, completing the first “A” wave of an A, B, C correction. Typically the be wave is a counter wave which moves in the opposite direction of the current trend and will typically regain 50% to 75% of the price decline during “A” wave. Gold traded as high as $2025 before ending the “B” wave and on Friday entered the final “C” which when concluded will complete the correction.
Our studies indicate that selling pressure could continue and the most logical price points to look at for support are $1875, or $1846. The first number is derived from what is labeled as a flat ABC correction, which means that the low of the “A” wave is equal to the low of the “C” wave. The latter number of $18 $46 was derived from the 38% Fibonacci retracement of the entire major leg of the rally which began at $1450 and concluded at $2088.
While it is very possible that we will see more downside in gold, it is also highly likely that once concluded we will enter a final fifth wave which will take gold pricing to a new all-time record high.
Wishing as always, good trading,
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Gold Forecast: Proper Action
We are currently flat with no active trades in either gold or silver futures and Forex gold. We are still long both GLD and SLV. And on today's video report we will explain why we believe that this portion of your overall portfolio is meant to be a long-term investment rather than a trading vehicle.
Yesterday we sent out a -Trade alert to raise stops
GC Z20: Raise stop to $1979.20. Maintain long December 2020 gold @ $1955.50.
SI U20: Raise stop to $26.87. Maintain long September 2020 silver @ $26.68.
XAU FX: Raise stop to $1967.52. Maintain long Forex gold @ $1947.40
Trades we Closed on August 19th
Long September silver at $26.68. Our stop was hit @ $26.87 for a profit of $1000 per contract.
Long December Gold at $1955.50. Our stop was hit @ $1979 for a profit of $2350 per contract
Long Forex Gold at $1947. Our stop was hit @ $1967,52 for a profit of $20.52 per Ounce
Trades we Closed on August 11th
Long September silver at $24.40. Our stop was hit @ $25.99 for a profit of $7950 per contract
Bought GLD @ $166.74. Our stop was hit @ $$183.00 for a profit of $16.87 per share.
Bought SLV @ $18.00 Our stop was hit @ $23.80 for a profit of $5.80 per share.
Trades We Closed on August 7th
NUGT – we sold all shares and took profits of $33.19 per share
Long December gold at $1997, we covered the trade @ $2035 for a profit of $3800 per contract
Long Forex gold at $1977, we covered the trade @ $2017 for a profit of $40.00 per ounce
Gold Market Forecast
If you recall from yesterday’s show, I spoke about the distinct possibility that this current leg of the rally might in fact be a counter wave to an A, B, C correction. Typically, the B wave which is always a counterweight will regain between 50 and 75% of the price range found during the A wave. After completing yesterday show I began to do a more comprehensive study of that possibility and determined that the probability that we were witnessing a counter wave which would be followed by a sharp correction was relatively high.
It was for that reason that I sent out a special trade alert recommending that we raise it stops above our entry point in order to profit from the trade rather than sustain a loss. While the profits achieved during this trade were nominal when compared to the recent trades, a win is still a win, and a loss is still a loss. Which is why I’m most happy to report you that we were able to profit from this last trade.