Gold Futures Break Out to Downside

The gold futures market spent an entire month basing a bottom around the 200-day moving average at $1,270 to $1,276. While there remained a “lid on the market at $1,300, most traders felt comfortable buying gold under the $1,280 level. There was a clearly defined trading range. Now that the weak longs have been squeezed out, and granted the charts still point lower, I think that the downside is very limited and at the very least the market is oversold. “Bottom and top picking is a fool’s game.” I get that, but what has really changed fundamentally to take $58 of premium out of gold? Is there no need for a “safe-haven”? Is the US Dollar strength going to continue after the widely anticipated December rate hike? In my opinion this selloff in gold was nothing more than a fishing expedition. The market needed a breakout and failed to get a close above $1,300 so why not try the downside at $1,270? I think that gold is a good value at $1,250 and I would expect other technical traders are looking at this level to re-enter the market. All markets have a tendency to over reach, especially on the way down. At the very least, look for a recovery bounce back towards the $1,270 to $1,275 range.

Here’s some food for thought…at what point does gold get some buying support from the Bitcoin buying frenzy?

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or fcholly@rjofutures.com.

Gold Feb18 Daily Chart