A huge reversal in gold this week as the US Dollar Index hits new contract highs. Once gold broke below $1,850, technical selling took over as sell stops were triggered. Gold and outside markets are reacting to the renomination of Fed Chairman Jerome Powell. The believe is that Chairman Powell will be more “hawkish” than what a new Fed Chairman would be.
Gold has quickly become over sold and while I’m unsure if the market will have an equally sharp rebound, I do see a good opportunity to get long again in the $1,785 to $1,780 range. Dollar strength is gold’s biggest obstacle right now. I do believe that gold will adjust to rising rates and Dollar strength in a positive way. There’s a level on the chart where the slide lower will reverse. Traders should not have been so invested in the prospect of a new and more dovish Fed Chair. Better the devil that you know.