Metals

Gold In the Middle of a Tug of War

Posted 11/22/2019 10:41AM CTJoshua Graves

If we look at how February gold has traded over the past few weeks, it should come as no surprise that a stock market rally has pressured the precious metals market in a big way. Full disclosure, I don’t see gold going beneath 1425 over the next month, but I absolutely do not see gold rallying back to contract highs either. I think that the market sentiment as a whole is mainly three categories that are all playing tug of war with gold.

The first would be the gold bulls who think that the trade talks will collapse any day, Trump will be impeached, and the stock market is going to be down double digit percentage points. The second category would be the gold bears who believe the stock market is strong, manufacturing data this morning proves that, and company earnings continue to blow away expectations. The third is a category that I fall into where logic dictates that there is plenty of uncertainty to keep Feb gold well supported from 1425 to 1450, but not strong enough to run back the mid 1500’s. Market sentiment and the technicals are what I am watching right now, and gold should continue lower to around 1435. This is the sweet spot I am shooting for, and if we were to trade down to this level I think there is a great opportunity for metals traders as a whole.

There are excellent ways to approach gold with deep liquidity in gold futures vs any ETF and options that are far superior to any gold ETF. Gold futures trade $29B worth every day compared to the most popular gold ETF (GLD) with just $1.1B trading every day as an example. .

Joshua Graves

Josh began his career in May of 2013 after graduating from Purdue University, West Lafayette. He received a degree in Agricultural Economics, with a Certificate in Entrepreneurship. He started at Paragon Investments in Kansas, the heart of wheat country. While working there he developed long term relationships with corn, soybean, and wheat producers, speaking with them on a weekly basis. His goal was to market their physical production more effectively through tracking basis, as well as hedge their exposure in the grain and cattle markets through a variety of futures and option strategies. He then moved to Florida to work for PFL Petroleum, a physical biofuels brokerage, and gained significant exposure to OTC and physical energy markets. Trading has been a passion from day one of his career. In his free time he stays active in downtown Chicago, attends sporting events, and holds an FAA Private Pilot’s License and flies Cirrus and Cessna aircraft regularly.