The information and opinions expressed below are based on my analysis of price behavior and chart activity
February Gold
The December contract is still the “front month” for another 10 days, but the Open Interest has shifted to the February contract now and the trading volume will show up in this contract over the next few days. As I write this, there is not a settlement price for this contract yet, as trading goes until 4 PM CT. However, the traditional (old school?) day session ending of 1:30 CT is when most of the trade volume typically evaporates. As you can see by the chart above, the market is currently near the $2675 level. The selloff that began on Halloween accelerated as the results of the recent US election became clear. Traders that had been bidding up the Gold market since late June stepped back and prices retreated quite aggressively. There’s been much talk recently about the “Trump trades” unwinding or reversing direction, but here’s how I look at it. He’s not president yet and there’s still a ton of things going on around the planet. Trump will do things differently than the current administration, no doubt, but not until after he’s inaugurated in late January. This week, some traders seem to be realizing that and prices have climbed about $82 over the past three days. The market ended it’s selloff, perhaps coincidentally, right near the 50% Fibonacci retracement (green horizontal) and the 100 day moving average (grey) The market posted a Doji on Friday, opening and closing at nearly the same price, indicating a point of price equilibrium to me. Monday’s close higher, and outside of the Doji’s range, sparked more buying interest on Tuesday and now today. Volume has been increasing over the past 3 sessions (bottom of the price chart) although it’s not anywhere near the volume we saw during the aggressive selloff in the first half of this month. In fact, the volume appears to have “bottomed out” last Thursday when prices spiked to their most recent lows. To my eye, that means a lack of sellers, as no one was willing to continue to push prices further after that. Aggressive and well margined traders may do well to consider long futures positions from here. If you should choose to go that route, I would suggest using Put options or a Sell Stop in the futures to manage potential downside risk. The uptrend is still intact, as long as we don’t get a significant close below the 100-day average ($2603 currently). Today’s trade found decent support from the 10-day moving average and the 38% Fibonacci number. There is overhead resistance on the chart, in the form of the 50-day moving average, ($2697 currently) that may slow the ascent somewhat. That also coincides closely with the $2700 a big, fat, round number and we may see some short-term profit taking near there later this week. Fundamentally speaking, nothing has changed on the demand side that I’ve seen. Gold is still in high demand, not just for jewelry, but for industrial application as well. Central Banks have also been buying the metal, along with anyone else that is seeking a “safe haven” for their money. I’m not sure about the “safe haven” thing, as these ARE futures contracts that we trade, and nothing is ever safe or certain in futures trading. Less aggressive traders may do well to consider long Call Option positions, as premiums have declined sharply over the past two weeks. The contract high is $2,826.30 (Oct 30th) and a $2800 call last traded at 31.90, or $3,190 plus commissions and fees. A $2850 call could be sold against that, last trade at 23.20 or $2,320 plus commissions and fees. That’s roughly $870 out of pocket, plus commissions and fees, for a speculative long position in this market. If you choose to go that route, I would strongly suggest that GTC orders be placed to try and take a profit at 2x what you paid for that spread. If you’d like to learn more or discuss this further, please reach out. My direct number and email are below.
Jefferson Fosse Walsh Trading
Direct 312 957 8248 Toll Free 800 556 9411
jfosse@walshtrading.com www.walshtrading.com
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.