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Gold and Silver Continue to Slide

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PREMIUM MEMBERS

The current selling pressure in gold and silver continues and accelerates, even with a dynamically weaker U.S. dollar. The U.S. dollar is once again trading under pressure, making this the fourth day in a row. As of 3:30 Eastern Standard Time, the U.S. dollar index is off almost half of a percent, currently fixed at 98.61.

The weak U.S. dollar has added approximately $7.55 of value to each ounce of gold. However, selling pressure has resulted in a net loss of $17.05 on the day. After subtracting gains from a weak U.S. dollar, spot gold is $9.50 lower. It is currently trading at $1228.20, per the Kitco Gold Index. Gold futures are also trading under extreme pressure, and based upon the most active June 2017 contract, are currently trading off by almost $20 at $1228.80.

Silver has not been able to avoid this most recent selling pressure, losing approximately 1.4% on the day, with silver futures currently trading at $16.31 per ounce. Platinum and palladium are now swimming against the tide, showing small positive gains on the day, which are net changes due to a weak U.S. dollar. Direct selling of platinum have taken that precious metal down $0.50 on the day, while palladium traders have bid up the precious metal approximately $1.10, before adding dollar weakness gains today.

Technical Chart Damage

Yesterday’s strong selling pressure resulted in technical chart damage when gold prices traded and closed below both the 50-day and 200-day moving averages. Although gold prices gained back some of the weakness seen earlier in the trading day, yesterday’s price not only broke below the 200-day moving average, but also closed just below the short-term 50-day moving average. These two indicators are considered benchmarks when looking at long-term trends in any given market. Follow-through selling today moved current pricing further below those two critical averages.

The real question traders are asking is whether this recent downside selling is the end of the current rally which began at the end of last year or a result of aggressive traders running stops and tapping out weak positions.

As reported by MarketWatch, “Gold dropped suddenly, as various technical levels on the downside were violated,” said Nico Pantelis, head of research at Secular Investor. “We still have to find out if this is a shakeout, or a turn of the uptrend. If gold drops towards $1,200 and below, writing is on the wall for gold, in the near term,” he said.

The market is “still positioned for higher prices within the gold complex, but the lure of the equity bull is becoming irresistible for traders,” Pantelis said. “Gold could come back to life, if equity markets get bombarded all of a sudden.”

On a technical basis, today’s closing gold of $1228.70 was below the 38% retracement of the entire yearly range. The next technical support level is the 50% retracement of gains achieved this year which falls at $1209, with a 61.8% retracement of this year’s gains falling at 1190. These two retracement levels, especially the 61.8% retracement, are defined lines in the sand to the technical trader. A case can be made for this current selloff to be part of a longer set of peaks and valleys that are still components of a bullish rally.

However, if gold prices continue to trade under pressure and break below the 61.8% retracement, it is highly likely that the bull run experience at the beginning of the year has concluded.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer