Compressed Range and Equal Lows Indicate Possible Bottom in Gold
As this post-holiday week begins there is a mixed bag in the precious metals’ markets, with gold and silver trading fractionally higher on the day and platinum and palladium closing lower. Gold and silver are almost equal in their percentage gains on the day, with gold currently trading up .09%, and silver currently trading .15% higher on the day. This all with a moderately lower U.S. dollar.
As of 4:25 PM Eastern standard time gold futures basis the most active June contract is currently trading up $1.10, and fixed at $1277.10. Silver is up $0.15 and fixed at $14.97. At the same time platinum futures are down by $0.50 and currently fixed at $903.20. The largest percentage drawdown today can be seen in palladium futures. The precious white metal remains as the highest priced metal when compared to gold, silver and platinum. However, in today’s trading it lost 1.91%, which is a drawdown of $26.70, fixing the precious metal at $1371.80.
Most interesting is the continued uptick of central banks worldwide accumulating gold with the exception of Venezuela which has been selling large amounts of gold from their reserves to keep their obligations to creditors in check.
Venezuela’s liquidation is occurring at the same time as two of the three superpowers have been adding to their gold reserves and they are reportedly liquidating U.S. dollars to pay for these purchases. China has been on a buying spree steadily increasing the People’s Bank of China gold reserves. And they aren’t even the biggest fish in the sea.
According to Kitco News the central bank of Russia is also adding gold reserves as they decrease their holdings of U.S. dollars. In a press release on Friday it was announced that the Central Bank of Russia added 18.7 tonnes of gold to its reserves. This raises their gold holdings by almost a full percentage point, and takes their total reserves to 69,700,000 troy ounces or 2,167.9 tonnes. According to the World Gold Council in 2018 Russia surpassed China as the country with the most gold reserves in the world.
On a technical basis, gold futures have been holding the lows achieved last week. After selling off approximately $20 on Wednesday. The next day hitting the lowest price point of the year last Thursday, gold has closed just above $1275. A critical level of support which must be held if in fact gold prices are bottoming as we believe they are.
Support at $1275 per ounce correlates with the .38% Fibonacci retracement level. This retracement level is created from a rather long data set which begins in December 2016 when gold traded to a low of $1120 per ounce, up to the highest trading point for gold over the last three years which is $1370 per ounce.
Resistance is currently at $1291 per ounce. This price point is the current 100-day moving average as well as the .38% Fibonacci retracement level from a much shorter data set. This data set begins in November 2018 when gold was trading at $1196 per ounce, up to this year’s high of $1350 which occurred in February.
Wishing you, as always, good trading,