The Iraq Surprise
The sweep across northern Iraq by radical Islamists seems to have caught Iraq, the U.S. and its allies off guard and has thrown an element of uncertainty into world affairs.
Gold took advantage of the conditions and zoomed up more than 1%, although it has since fallen back.
The dollar weakened as well, not due to the Middle East developments but because of softer-than-expected retail sales and labor weakness. Retail sales grew about half the amount economists had been predicting, 0.3% versus the anticipated 0.6%.
As we might have guessed, oil soared, rising well over 2%.
What will happen now in Iraq and Syria is anyone's guess. The group precipitating the fighting is called ISIS, and seems intent on establishing a pan-Sunni-Islamist regime in eastern Syria and northern Iraq.
Probably what will ensue is a long-term civil war, since there are many other interested parties fighting for diametrically different aims. The Kurds are among those groups, and they seek autonomy from Iraq, Syria and Turkey.
The Sunni's may have the edge through surprise at the moment, however, Shiites are the dominant religio-political group in Iraq, and of course, they have the ear of Iran, immediately to the east.
Nevertheless, the outlook for now is instability and that can be good for gold, although as we saw during the Ukraine-Crimea crisis, such effects can be startlingly brief, though intense.
The instability in Iraq also managed to take the starch out equities, leaving the three U.S. indices off between 0.6% and nearly 0.8%. The confluence of events and weak data may be just the thing some traders were looking for to inflict a more serious correction.
Hold on to your hats.
As always, wishing you good trading,
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Gold Forecast: Proper Action
Maintain long gold at 1253.20
Maintain long silver at 19.03
TODAY'S VIDEO IS A "MUST WATCH"
Today's video will discuss exit strategies. We will look at and weigh the pros and cons to these techniques:
The first technique is to put a price order in between 1283 and 1285. The second technique is to simply trail stops below the lows of the last three trading days.
We also discuss silver's upside potential in today's video.
Gold Market Forecast
Today's dramatic price rises in both gold and silver have absolutely signaled a continuation of the upside rally which began last week.
Over the last few days we have been talking about the different types of rallies that can unfold when we see a market moving higher. This current rally in gold has been really characterized by price spikes followed by short periods of consolidation.
This to me is the most stable of all rallies in that each time we have price moving higher, we get a sideways market rather than a market which corrects in a stair step manner.
We have moved above our first target, in gold which was sitting at 1262. As you know it was my belief that we should have no difficulty moving above that price point. Today's higher pricing certainly affirmed that assumption.
We are now looking at current resistance in gold between 1283 and 1288. That is based on two factors. The first factor is a 50% Fibonacci retracement, which occurs at 1288. The second factor is that as the market was trading sideways last month, the real bodies on a daily and weekly chart seem to find support at that price point before breaking hard to the downside.