February Gold, Buy the Dip?

January 26, 2018 8:42AM CST

February gold futures have seen a significant pullback off the high’s on a recent bounce in the US dollar. We have seen a number of reasons for the continued bullish trend in gold.  The first and most obvious reason for a push above $1,350 were remarks from US Treasury Secretary Steven Mnuchin’s welcoming of a weaker US dollar. A weaker US dollar, all things being equal, boost commodity prices across the board. It helps US origin commodities become cheaper to purchase and keeps us competitive in the world. Another fundamental reason for the push higher has been talk of inflation occurring should the economy remain as strong as it is. The real driver of this rally should not be overthought; it’s off of a very weak US dollar. There is some talk of a potential “trade war” with China or another country, but I believe this will not occur. China is too important to us at the moment, with the most obvious being keeping China on board for North Korea sanctions. February gold futures today have in fact bounced near the $1,340 level on weaker US GDP data coming in at 2.6% vs 3.0% expected.

The technicals on gold remain friendly. We approached overbought conditions, however, this recent pullback has helped build a case for another leg higher. Any dip in the market needs to be bought into. Look for strong support account $1,340 and a breakout above $1,366 will signal a breakout and potential run to $1,400.

Gold Feb '18 Daily Chart


RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.