Trade War Truce Creates Solid Risk-On Market Sentiment and Selling Pressure for Gold

July 1, 2019 - 6:31pm

 by Gary Wagner

Gold prices plunged immediately upon opening Monday morning in Australia. This in response to a perceived favorable outcome of the one-on-one talks between presidents Trump and Xi Jinping at the G 20 meetings held in Osaka Japan. The keyword was “truce”, with both sides agreeing not to invoke further escalation of the trade war between our two superpowers. In essence the net result was that both countries pledged to once again begin to trade negotiations at a later date.

As of 4:30 PM EDT gold futures basis the most active August contract is currently at $1386.20, a net decline of $27.50 on the day. After opening in Australia yesterday at $1401.80, traders and market participants increased the pressure taking gold below $1400 per ounce and traded to a low of $1384.70 before prices inched just above the low achieved over the last 24 hours.

This selloff comes in unison with a dramatically higher US dollar and a return to extremely favorable risk on market sentiment taking US equities higher on the day. The Dow Jones industrial average in almost ½ a percent today, and after factoring in the daily gains of 117 points is currently fixed at 26,717.43.

The US dollar gained strength and the index closed today at 96.37 which is a net gain of almost ¾ of a percent. This accounting for a solid percentage of the price decline experienced in gold. Considering that gold futures gave up 1.93%, and the US dollar gained .74%, selling pressure was greater than dollar strength contributing well over 1% to today’s price decline in the precious yellow metal.

As we spoke about on Friday’s recap, a favorable outcome regarding the talks between the United States and China would certainly have a dramatic impact on gold prices as they began their trading week in Australia. That is exactly what traders witnessed with both China and the United States announcing a truce in the current trade war in which both sides vowed to not escalate negative actions and  set the tone for negotiators to return to the table.

Our technical studies indicate potential support for gold at two distinct price levels, both based upon Fibonacci retracement price points of this last rally. The lowest we believe this current selling pressure will take gold to is approximately $1350 which is the .618% retracement of the price move from $1292.02 $1442. Above that .38% - .42 % retracement level which comes in at 1379 to $1385 per ounce.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
After taking profits on Tuesday June 25, we are currently flat with no active trades in gold or silver.
 
On Tuesday June 25, we sent out a special trade alert recommending that our subscribers take their current protective stop to the market to take profits on our current trade. We entered a long position at $1339, we sold or covered that long trade last week at $1410 for a profit of $7100 per contract. This is roughly a 70% return on this trade.
Gold Market Forecast

After pulling profits last week when gold traded to $1410, we have maintained a neutral stance with no active trades in gold or silver. This stance was highly contingent upon the outcome of last week’s G-20 meeting. As the gold market reopened on Monday morning in Australia, traders immediately saw the response to the truce between the United States and China as favorable to risk on market assets and extremely bearish towards the safe haven asset class, specifically gold. As such on-today’s report, we will detail the key price points that we are looking at as entry levels for our next trade. The key levels can be seen in the chart gallery and the video report.

Sentiment Indicator:
Gold -> Neutral
Silver -> Bearish
S&P 500 -> Bullish
Bitcoin -> Bearish
Bitcoin fundamentals by Joseph M. Wagner II:

Today the carnage continues in the cryptocurrency with Bitcoin trading down around 9% in the various cash market exchanges. With the futures being closed for the last two days it had to play catch up, or catch down with the losses that were achieved during this weekend and opened today at $11,505 in the CME futures contract, gapping down by approximately $1000 from Friday’s close and only trading lower from there and as of 5:00 PM EDT is fixed at $10,565, a 16% decrease from Friday’s close.

Essentially today’s price action in the CME closed the gap that formed on a daily candlestick chart during the weekend from its close on June 21st to June 24th when the market re-opened. Today’s intra-day lows came within $100 of the intra-day high on Friday June 21st. This could be signaling that more of the gaps that were created between Friday closing prices and the opening price the following Monday on the CME.

The two levels most likely to hold as support which happen to two of the remaining three weekend gaps to be filled. The first level of support comes in around $8,500. The other level of support comes in between $6,300 and $6,800 and traders should look at this level very closely as we believe there is not only a real possibility a correction taking it to this level.

This could make a great entry point for traders that may have missed earlier opportunities to get any Bitcoin at this price or for traders that already hold Bitcoin at any price to add to their positions. This level around $6,500 also represents the .78% retracement of this multi-month bull-run and therefore cannot dip below if it is to remain in a bullish trend. We still are looking ahead and forecasting higher pricing based mostly on the fundamentals but also on a technical level BTC has been overdue for a real correction and that makes a shallow correction less likely on a technical basis.