Gold Closes Above Its 100-day Moving Average

For the first time since April 26, gold has closed above its 100-day moving average. Although gold closed well off of the intraday high, it did manage to close above the 100-day moving average for the first time in six months. Gold prices surged to a high of $1,243 before backing off, and as of 4:20 PM Eastern standard time, gold futures are currently fixed at $1,233.20, which is a net gain of $8.60 (+0.70%) on the day.

Today’s dynamic upside surge is almost entirely the net result of traders bidding up the precious yellow metal, with a fractional percentage due to dollar weakness. Physical gold closed up $8.20 on the day. According to the KGX (Kitco Gold Index), $6.85 of today’s gains can be directly attributed to buying, with the remaining gain of $1.35 as an outcome of dollar weakness.

Global Equity Selloff Sparks Precious Metals Rally

With respectable gains across the board, all of the precious metals today traded to higher ground, with palladium leading the advance and gaining over 1.7% in value today. Coming in second was platinum, which gained 1.63% today, followed by silver which gained 1.15%. Although gold had the lowest percentage of gains on the day, the precious yellow metal was still able to advance by + 0.72% ($8.90).

These advances were tied to weakness in the global equity markets, which suffered deep losses which were the net result of global growth fears in China. The vast majority of today’s gains can be attributed to a flight to safety found in the safe haven asset class.

The Dow Jones Industrial Average traded over 500 points lower during the day. However, U.S. equities did recover during the second half of the trading session, resulting in the Dow closing off by only 125 points today. This recovery diminished the flight to safe haven assets as gold traded off of the highs, giving back $10 of the intraday gains.

The chart below is a 30-minute candlestick chart with gold futures on the top, and the S&P 500 e-mini futures below. It is clear that the vast majority of gains in gold occurred as the U.S. equity markets sold off. It is also clearly visible that the recovery in U.S. equities corresponded to gold prices, softening and moving off of their highs to their closing value.

Although gold gave back roughly half of gains achieved in the morning, the resulting nine dollars in gains is still respectable. Today’s rise above this average comes roughly one week after gold prices surged above the 50-day moving average, which signaled the real possibility that gold had entered a short-term bullish mode.

The fact that gold closed above its 100-day moving average signals the real possibility that, on an intermediate basis, gold is in a bullish trend.

Wishing you as always, good trading,