Chart of the Week – Gold

Each week Longleaftrading.com will be providing us a chart of the week as analyzed by a member of their team. We hope that you enjoy and learn from this new feature.

August Gold Futures This Week

As last week inched up onto Friday the 13th, even the traders that do not consider themselves superstitious were feeling a bit apprehensive about market direction. Many of the major global markets traded in ranges, but overall did not show much promise for anyone hoping to confidently commit to a buy or a sell.

In last week’s trade, the September Euro began closing below the June low around 123.00 after Europe failed to convince anyone on the short side to even take profit until the end of the week. The US Dollar futures in September did test the high price from June around 84.00, but did not see a follow through buy to finish the week. Were it not for the recovery bounce in the markets on Friday the 13th, I would be painting a very bleak picture in this week’s review of the Gold Futures.

As far as commodities are concerned, last week brought hedge funds and speculators money in on the buy side. Most of the major purchases were seen in the Grains and some in the Crude Oil. There is speculation that China may take steps to boost growth in the markets after a string of disappointing reports. China reduced their interest rates in the months of June and July and have lowered Reserve Requirements several times since late last year, but these measures are failing to produce any major sparks likely because of the continued drag of Europe on global markets. This is why traders are keeping their eye on news out of China for any indications of further easing.

Last week, I predicted a choppy week for the Gold Futures, and the market provided exactly what I was looking for. This week however, I think may have better potential for a directional play. The reason for this is due to the fact that last week brought attention to long positions in commodities and I do not think the Precious Metals saw their fair share of buying yet.

One standout (see chart) is the Gold Markets failure to retest the triple bottom low from the month of May. Arrow #1 shows the May low and arrow #2 points out a higher low from late June. As Gold Futures probed lower in Thursday’s trade, it failed to retest the June low and reversed at a higher price as seen by arrow #3. This price action now shows an upward trend beginning at the May low prices, which should be seen as bullish for the week.

There are no options or futures expirations until next week in the Metals, so unless the lighter volume environment really comes into play, I do not suspect that there will be any major swings this week. I would like to see Gold prices closing above $1600 again this week, and would feel even better if this week could produce a close above the high price posted on July 2nd, around $1620.

Overall, I think that this week may favor the upside in the Precious Metals as commodities are experiencing an increase in net long positions. After last week’s choppy trade and the Gold Future’s failure to retest chart lows on Thursdays drop, there should be enough reason to scale into the long side of Gold on pullbacks.

If you have any questions or comments, please feel free to contact me directly at my office email bbooth@longleaftrading.com or by phone at (888) 272-6926. I will be happy to hear from you.

Thank you for your interest,

Brian Booth

Senior Market Strategist