Gold Prices: Are You Not Entertained?

2015-11-27 20:45:00

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Talking Points:

Gold Technical Strategy: Short, first target of previous setup met, next target at $1,050.
Gold is currently sitting near six-year lows; and this is unattractive for new short positions. But previous support may come in as resistance in the early portion of next week, and this can provide motive for down-side triggers.
Price action is finally nearing support of the 2+ year trend-channel, and that projects to approximately $1,050 for the next week.

To explain the price action seen in the Gold prices over the past month and a half, we had to borrow this article’s title from Russell Crowe’s performance in the film Gladiator. Because that’s pretty much what we’ve seen in Gold prices as this December rate hike from the Federal Reserve continues to get priced into markets: It’s been pure and utter carnage.

Since that pivot in the middle of October in which a December rate hike from the Fed went from a minimal possibility to a likely probability, we’ve seen Gold run lower by over 11%, and we’ve seen 25 of the past 32 days trade off. Numerous support levels have been smashed during this descent, and this has made short-side entries rather complicated as even retracements have been sold heavily. In our last article, we identified an aggressive short-setup off of a key level of resistance at $1,087.05. This is the 50% Fibonacci retracement of the ‘big picture’ move in Gold, taking the 1999 low at $253.30 up to the 2011 high at $1,920.80. And since then, we’ve seen Gold prices continue to react lower, and the first target has been met at the prior low of $1,063.84. The second target remains at $1,050, and given next week’s trove of upcoming data, this target could be soundly met in the early portion of next week.

But, on the prospect of new positions, we’re very much in the same situation that we were in when we discussed a similar movement in Gold prices in the article, The Carnage Continues in Gold Prices, and You Have 3 Choices. At the time of publishing that article, Gold had just broken below the previous 2015-low at $1,071.28. And as we advised in that article, it would probably be more accomodating to wait on the short-setup; let prices retrace so a more adequate entry could be taken with resistance offering risk management levels. A mere four days later, Gold prices had retraced to that $1,087.05 level and an aggressive short entry was possible.

Moving forward, particularly in the early portion of next week, patience may be the most recommended way of approaching the Gold market, in order to let prices retrace to a more amenable area of entry for new short positions.

Potential levels of re-entry for short Gold positions could be sought in the vicinity of prior support levels. So, the most aggressive re-entry level would be that most recent low of $1,063.84, but deeper retracements could be sought out at $1,071.28 (the previous July low), or even back to that $1,087.05 Fibonacci level. Traders can look to cast stops above the next resistance level, with a target cast towards previous lows. The current swing-low of $1,052.60 would be an attractive profit target, as this could allow a trader to clear off a portion of the trade before running into psychological support at the $1,050 area, which is the projection of the 2+ year bearish trend channel that’s continuing to work in Gold.

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