Gold futures had a historical upside move today. Not only did gold pricing break above the key and major resistance level that occurs at our harmonic. We define a harmonic when two different technical studies point to the same price point. In the case of gold today, it broke through a major key psychological level at $1800. This also corresponds to the 38.2% Fibonacci retracement level, which is currently at $1797 per ounce. What is even more impressive is today’s strong rally not only resulted in a close above $1800 but rather a close to $1815, which is far in excess of the major resistance area that was broken. Marking the highest close since February, gold futures based on today’s action are destined for substantially higher pricing.
Consider that over the last 15 trading days, gold has been mired in a narrow and defined trading range between approximately $1765 and $1798.60. we have seen an attempt at a breakout where prices either challenged the high or the low, but in all cases, they failed to move above resistance or below support on a closing basis. That all changed today and quite frankly took many analysts and market participants by surprise. While it was a welcomed surprise, it was nonetheless an unexpected move that occurred.
Two primary factors have been cited by multiple analysts as the precipitating factor which moves both gold and silver prices substantially higher. The first is higher yields in U.S. Treasury 10-year notes, coupled with dollar weakness.
In the case of the 10-year notes, yields have been heading lower recently, as some analysts predict it will continue to see a diminishing yield which could take it back to approximately 1%. The fact that gold prices finished so strongly and so far above major resistance suggests that it has much higher to go in the near future. Based on our current technical studies, today’s solid upside move opened just above yesterday’s close, and during the session broke substantially above the 100-day moving average, closing just above $15 above that key level of resistance which most likely will now become support.
Based upon our study of a Fibonacci retracement, we see the next level of resistance at $1844.20, which is the 61.8% Fibonacci retracement level. The chart that we have included in this article is a horizontal line coming in at $1815.90, which matches precisely with the intraday high which occurred on February 23; however, the first time market forces took gold pricing above $1815 on a closing basis occurred on February 8.
Key and critical support must be pegged at the former resistance of $1800 per ounce with a minor support level below that at $1768.60, which is the 50% retracement.\
Copper and silver rally exceeds expectations
Silver was able to also have a dynamic performance closing in New York at $27.42. However, it is copper that has drawn the attention of many traders who typically focus on the precious metals simply because the enormous upside potential and profit potential based upon demand greatly exceeds supply. Both our technical studies as well as forecasts from the commodity strategist at Bank of America are predicting the copper could trade as high as $580 per pound over the next few months, which is just shy of $13,000 per metric ton. Considering that a futures contract of copper represents 25,000 pounds, such a move could yield a profit of approximately $250,000.
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Wishing you, as always, good trading and good health,