The gold futures market spent an entire month basing a bottom around the 200-day moving average at $1,270 to $1,276. While there remained a “lid on the market at $1,300, most traders felt comfortable buying gold under the $1,280 level. There was a clearly defined trading range. Now that the weak longs have been squeezed out, and granted the charts still point lower, I think that the downside is very limited and at the very least the market is oversold. “Bottom and top picking is a fool’s game.” I get that, but what has really changed fundamentally to take $58 of premium out of gold? Is there no need for a “safe-haven”? Is the US Dollar strength going to continue after the widely anticipated December rate hike? In my opinion this selloff in gold was nothing more than a fishing expedition. The market needed a breakout and failed to get a close above $1,300 so why not try the downside at $1,270? I think that gold is a good value at $1,250 and I would expect other technical traders are looking at this level to re-enter the market. All markets have a tendency to over reach, especially on the way down. At the very least, look for a recovery bounce back towards the $1,270 to $1,275 range.
Here’s some food for thought…at what point does gold get some buying support from the Bitcoin buying frenzy?
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Gold Feb18 Daily Chart