Gold Continues to Trade Under Pressure

February 6, 2019 - 5:55pm

 by Gary Wagner

Gold futures broke a key support level at $1312 today. As of 5:00 PM Eastern standard time April futures are trading at $1310.50 which is a net decline of $8.70 on the day. Spot gold is experiencing similar draw-downs, and are currently fixed at $1306 after factoring in a decline today of $8.80.

According to the KGX, (Kitco gold index) today’s decline is almost an equal combination of dollar strength and market participants bidding the precious yellow metal lower. Currently dollar strength is accounting for a decline of $4.50 today, with the remaining $4.30 attributable to selling pressure.

Considering that the current leg of this rally began at $1200, this decline is to be expected. This leg began following the first part of a larger rally which began after market forces took gold pricing to $1167 per ounce.  This confirms that bullish sentiment continues to dominate long-term views of the market.

Beginning at $1196 per ounce during the middle of November 2018, this current leg took gold pricing $134 higher before profit-taking began. This fits within the normal parameters of gold trading higher and exhibiting a bullish demeanor with defined corrections along the way.

The question becomes if gold is truly still in a bullish mode how low could gold pricing go before this correction concludes, and the trend pivots and once again begins to gain value? Currently our technical studies indicate that the next real level of potential support comes in at $$1299.80 per ounce, which is the .23% Fibonacci retracement of this most recent leg which took gold from approximately $1200 to $1330. Below that price point the next level is created from the .38% retracement of the same data set which resides at $1279.40.

Either of these levels would be an acceptable level for a shallow retracement. A deep retracement could take current pricing as low as the .618% Fibonacci retracement which is currently set at $1247. Interestingly that particular price point is almost identical to the .618% retracement of a much longer data set, which begins at $1370 and concludes at $1167, thereby creating a Fibonacci harmonic. A Fibonacci harmonic is created when two data sets of different parameters occur at a similar price point. Such is the case at approximately $1247 per ounce.

However, it is our belief that any retracement should conclude well above $1273 per ounce which is the current 50-day moving average. If gold is truly in a short- term bullish mode it should continue to trade at or above this moving average. The long-term 200-day moving average currently resides at $1250.50. So most importantly as long as gold remains above that price point the long-term bullish outlook remains.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
We are currently Flat with no active trades. We are looking for the proper place to re-enter the market from the long side.
On Sunday, January 27,  we sent out a trade alert to buy April Gold
Friday we sent out a trade alert to raise stop to $1317.00
We took $1000 profit per contract when our stop was hit on Sunday
Gold Market Forecast

Today's lower pricing in gold confirms that we have in fact entered a correction. This correction began immediately following the highs achieved last week, when gold traded to $1330 per ounce. The question now becomes where will gold find potential support, which would conclude the current correction, and initiate a resumption of the rally which has been in play for quite some time.

Based upon our technical studies once $1312 was broken the next real level comes in at approximately $1300 per ounce. This represents a .23% Fibonacci retracement. Below that the next level we would look for if gold breaks below 1300, is $1275 which represents the .38% Fibonacci retracement.

Although a correction can go as deep as .618%, in this particular instance I believe we will see a shallow correction of .23% or .38% based upon the fact that the last correction witnessing gold was a fairly deep correction. In terms of and Elliott wave count there are two corrective waves, wave two and wave four and typically one of those corrections is deep and the other is shallow.

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