Dollar Strength and Increased Risk Appetite Weigh Heavily on Gold

May 16, 2019 - 6:36pm

 by Gary Wagner

Gold gave back the gains achieved earlier this week with Comex futures losing $10.80 (0.84%) on the day with the most active June contract closing at $1286.90. Dollar strength certainly contributed to today’s decline with the dollar index up .28% and fixed at 97.65. The remaining drawdown of .56% is directly attributable to selling pressure.

According to the KGX (Kitco Gold Index) spot gold lost $9.90 today and is currently fixed at $1286.20. Selling pressure accounted for -$6.30, and dollar strength added
the final -$3.30.

The selling pressure was a reflection of an increased risk appetite as U.S. equities scored solid gains for the last three consecutive days. Today the Dow Jones industrial average gained 0.84%, or 214.66 points. However, it was the NASDAQ composite which had the largest percentage gain today of 0.98%. This took the tech heavy index to 7898.60 after factoring in today’s 76.45-point gain.

According to Reuters, “Wall Street extended its rally in afternoon trading on Thursday as upbeat earnings and strong economic data put investors in a buying mood, with technology companies leading the charge. All three major U.S. stock indexes were up about 1%, bringing the bellwether S&P 500 to within 2% of an all-time high reached on April 30 … On the economic front, groundbreaking on new U.S. homes increased more than expected in April, according to the Commerce Department, as declining interest rates provided support to the struggling housing sector … In a separate report from the Labor Department, the number of Americans applying for unemployment fell more than expected last week.”

Technically today’s decline resulted in a 50% retracement of the most recent rally which effectively began on May 2nd when gold hit a double bottom at $1267 per ounce. After Monday’s tremendous upside spike which took gold pricing to just above $1300, Tuesday and today took gold pricing lower and is currently fixed just below a major Fibonacci retracement level of .38% (1287.30). If gold continues to decline the next major support level occurs at $1267, however if gold trades back above resistance at $1287 it could easily make a second play at closing above $1300 per ounce.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer



  Bitcoin Stalls at $8500, the .38% Fibonacci Retracement Level -   By Joseph M. Wagner II

 Bitcoin continues to hold onto the gains made earlier this week and is currently at $7900 with a small draw-down on the day of approximately $325     as of 4:00 PM EDT.  What is noteworthy is the intra-day high which traded within   $55 of current resistance at $8500. This resistance level is based upon the intra-day high achieved on July 24th, 2018 as well as the .38% Fibonacci retracement level. This Fibonacci retracement is based upon a data set going   back to January 2018 when BTC futures traded to approximately $11800 (a level that proved to be resistance on February 20th, when BTC made a double top at this price) down to the all-time lows just above $3000.

Support currently resides at the 50% retracement level at around $7450, below that major support resides at $6424 which is the .618 Fib. level, the pre-gap close last Friday as well as an area of historic price congestion giving this level of support strong validity.


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Gold Forecast: Proper Action

We are currently flat with no active trades.

On Sunday, May 5th, we sent out a trade alert to enter a long trade in June gold. We entered this position at $1285 with a stop at $1268. Yesterday we sent out a trade alert to modify the stop to $1291.13. That stop was hit today, resulting in a profit of $613.00 per contract.

Gold Market Forecast

Today's sharp decline of $10.80 certainly indicated strong resistance at $1300 per ounce. More so our technical studies suggest that gold could trade to a low of $1280 per ounce before finding support and returning to a bullish demeanor. This support level at $1280 is the .618% Fibonacci retracement of the most recent rally which you started at $1267 and concluded at $1300. Therefore we could be presented with an opportunity to enter the market below our entry point of our last trade at $1285.

Sentiment Indicator:
Gold -> Neutral
Silver -> Bearish
S&P 500 -> Neutral
Bitcoin -> Bearish