Metals

February Gold, Buy the Dip?

Posted 01/26/2018 8:42AM CTJoshua Graves

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

gold_feb18_daily_chart

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.