RJO FuturesCast

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Metals

Bottom to Finally Fall Out in Gold?

Posted 08/10/2018 9:03AM CT | Joshua Graves

December Gold has had no real reason to rally from a fundamental or technical perspective. The first and most obvious reason for gold’s continued weakness is a much stronger (and today is no exception) US Dollar Index. As of today, the front month dollar index has made a new high and shows no signs of slowing down. The fed continues to take a more hawkish rhetoric and four rate hikes is getting closer and closer to becoming a sure thing. The CPI number out today was in line with expectations at .2% and remains at a 6.5 year high. Inflation is still likely to remain strong with a tight labor market and an upside breakout in wage growth likely being the result, cementing a fourth rate hike in December. One longer term reason to be a buyer of gold is the yield curve which many in the financial markets are talking about. Before every major recession the yield curve between the longer term and shorter-term government loans starts to flip with shorter term loans yielding more than longer term loans, and it’s approaching an inversion once more. It’s something to keep an eye on that would change the tone for gold.

Gold technicals don’t look any better if you are bullish. The stair step pattern down is nothing new, with the first bear flag forming from May 1 to May 11 of this year, followed by a sharp move lower. I would look at gold as a trader and think that if 1200 doesn’t hold (and I don’t think it will) that a washout down around 1150 is surely possible before buyers of value step in and start to bid prices up.

Gold Dec ’18 Daily Chart

Gold Dec '18 Daily Chart

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Joshua Graves

Senior Market Strategist
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.
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