Gold Closes Lower After Failed Attempt at $1300

April 19, 2017 - 5:45pm

 by Gary Wagner

Gold is trading under pressure for the first time since April 10th, when prices moved above long-standing resistance at 1262. The rally that followed the price breakout only served to drive prices even higher. This resulted in prices moving within three dollars of $1300 per ounce on April 17th, when gold prices traded to 1297.30 on an intraday basis.

The breakout in gold, taking prices above 1262, was a move above its 200-day moving average, something that had not happened since November 10th of last year. It occurred immediately following the presidential election and upset victory of Donald Trump. Gold prices would trade dramatically lower after breaching this average, not finding support until December 15th of last year, when prices reached 1120.

Considering that gold prices have moved from 1120 to 1297 in just over three months, traders and market participants continue to look for optimal points to take short-term profits. Typically, strong rallies in gold will move prices anywhere between $100 and $160 higher.

Looking at the current rally, we see that the first leg contained a $100 move. Gold moved from $1120 to $1220 before meeting resistance and correcting back to $1180. This correction was a bit over a 38% retracement. During the second leg of the current rally, gold prices moved from $1180 to $1265. Once prices reached $1265, gold experienced the most dramatic correction this year as it gave up 50% of the gains achieved back in January of last year. That correction concluded mid-March when gold prices traded just under $1200. This takes us to our current rally which began at 1200 mid-March, and as of this week, traded to an intraday high of 1297.

Considering that today’s sharp price decline of approximately $12 comes after an unknown successful attempt to breach the $1300 per ounce barrier, we could be looking at another short period of price consolidation or a correction. It must be noted that the geopolitical tension and uncertainty that initially moved the markets above 1260 has not subsided long-term. Elections in France and Britain’s plan to exit the European Union have moved to the forefront.

In other words, don’t count out the rally that began at the end of last year. It is still quite probable that gold prices will trade to a higher high this year than last year.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
Last Tuesday (April 11)  we sent out a trade alert:  Major breakout above resistance. June gold up 19 dollars at 1273. Buy gold at market (1273 current). Stop under 1260
This morning we raised our stop and sent a trade alert to that effect.
Maintain long gold at 1273. Maintain Stop below 1278-1279  (Current 1281.50)
Gold Market Forecast

Although still a dramatic concern long-term, the crisis between North Korea and the United States has come to a pause. With attention now ratcheting down ever so slightly, and a rebounding US dollar, today gold prices traded sharply lower. The real question is whether or not the most recent moves in gold, i.e. the inability for gold prices to trade above 1300 is signaling a potential correction in gold prices or simply a pause and consolidating pricing. That question can only be answered as more data becomes available to us in time goes by. Regardless of whether this is a pause or correction we will properly position ourselves for the next major move in gold.