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Metals

December Gold, Setting Up for Big Rally?

Posted 10/19/2018 9:12AM CT | Joshua Graves

December gold has exploded out of it’s lethargic trading range over the past several months going back to early August. It’s move higher has been loosely tied to the recent stock market volatility we’ve seen, along with recent spikes to the VIX. Gold has a number of factors that could push the precious metal above the key 1250 level. One factor that recently started making headlines is the fear of substantial economic trouble in Italy over their standoff with the EU that stems from Italy proposing a budget that is outside the EU fiscal rules. This has led to investors selling Italian bonds and buying treasuries and German bonds (and gold for that). It’s something that has the potential to put very serious pressure on European markets, not long after the mess in Greece. It appears that gold isn’t catching a bid this morning but will likely continue to face strong headwinds over strong U.S. economic data, hawkish fed actions, and a likelihood of more aggressive interest rate hikes in 2019.

The earning season has kicked off with companies like Goldman Sachs and JP Morgan posting 20% gains in revenues over the quarter, supporting a healthy and robust economy. Gold is likely to be well supported over recent turmoil in Saudi Arabia, the U.S. stock market volatility, and an aggressive trade war with China to continue. If the current situation between all of the bullish and bearish factors holds, range bound trade is likely. An explosion into bullish territory with December gold would be almost certain if the likelihood of rate hikes in 2019 wanes, and the U.S. dollar index were to pull back below the October 16th low of 94.47.

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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