RJO FuturesCast

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Metals

Will Gold Ever Breakout?

Posted 04/20/2018 9:23AM CT | Joshua Graves

June gold has been unable to make up its mind in either direction. If you look at the fundamentals of why gold might be trading lower right now, it appears that pressure from a rising US Dollar has been the most clear and obvious reason why gold might be trading lower. The DXE has been pushing the key psychological and technically important 90.00 level three times over the past few months. All these times we have failed to garner enough strength to push above this level. Right now, the DXE is pushing to the 90 level as it last did the first week of April. The difference fundamentally is that now the Fed might be looking at four rate hikes instead of the “most likely” three rate hikes as it appeared earlier in the year. This is a bullish fundamental for the US Dollar and bearish for gold. This alone is a big reason why gold might never have enough strength to push above 1400. A technically important level to watch in the DXE is 90.5. If we get a close above 90.5, we could see gold finally breakdown beneath the longer-term low of 1310 around March 1. If we see a surging dollar, and a more hawkish Fed (despite less than stellar recent economic data) we could see gold breakdown beneath this level.

There has been plenty of bullish news in the headlines recently, however. The conflict in Syria is far from over and I could see an escalation of the conflict by something as simple as a miscommunication between Russian and American forces who operate so closely in the region. Demand for the physical has been great as well with gold and silver ETF’s pressing new highs, and China/India continuing to be strong buyers of the precious metal. Unless we see a surging US dollar, I believe the upside in gold is still there. Until then, we remain rangebound.

Gold Jun ’18 Daily Chart

Gold Jun '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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