RJO FuturesCast

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Metals

Gold Explodes to Six Year High, It Won’t Last

Posted 06/21/2019 9:43AM CT | Joshua Graves

August gold futures have exploded higher, and for all the reasons you would expect. The two biggest drivers of the move higher were quite simple and fundamentally correct from what one would expect. First and foremost, the big reason for such a large move higher was a U.S. fed that insists that a rate cut is likely next month, although leaving rates unchanged. The U.S. stock market took off on the news and gold followed suit. The Fed is leaning towards or hinting at a rate cut in their forward guidance, and this is bullish  news for the precious metal and bearish for U.S. dollar. The U.S. dollar is an interest-bearing asset that rises when interest rates are moved higher. The second and most obvious reason for the push above $1400 was Iran shooting down a U.S. drone in a clear and strong message to the U.S. that military options are on the table. Trump resisted the urge to strike back even though reports initially indicated he had in fact given a strike order, before at the last second cancelling such an order.

Technically, gold is in a clear uptrend and has taken out all buy stops that were sitting above the highs in the 1350’s. Gold is likely to now have a new floor around 1325 and a ceiling of around 1500 given the way it is trading. After such a run up, it’s likely that we get a corrective pullback to the 1365 level, before making another move that is sustained above 1400. There are ways to play gold without necessarily taking a directional stance if you are cautious about where it goes from here.

Gold Aug ’19 Daily Chart

Gold Aug '19 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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