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Gold Prices Go on a Wild Ride: Ending Back Where They Started

Gold Prices Go on a Wild Ride: Ending Back Where They Started

2016-11-09 18:06:00
James Stanley, Strategist

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Talking Points:

  • Gold Technical Strategy: Longer-term bullish > $1,200; intermediate-term unclear, short-term aggressively volatile.
  • Gold prices initially strengthened on risk aversion as it became obvious that Donald Trump was going to win the U.S. Presidential election; but after a move-higher of more than $63, normalcy was restored and price action moved right back towards pre-election result levels.
  • If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we took a cautious look at Gold prices attempting to string together a reversal of the early-October drive lower. As we noted, Gold prices throughout 2016 have faced pressure as the Federal Reserve has talked up near-term rate hike plans, and given the continued persistence towards a possible hike in December of this year, the possibility for continued pressure remained.

Since then, Gold prices have been on a wild ride. Last week as the US Dollar was weakening, Gold prices popped higher to find resistance at a zone of old support around the $1,307-1,309 level. After the Dollar gapped higher to open the week, Gold prices began falling and going into last night’s elections – it appeared as though this would continue. Markets were largely expecting a win for Hillary Clinton, and as it became more obvious that Mr. Trump was going to fare better than most projections predicted, the Greenback began to sell-off and Gold prices popped-higher, again. This led to a ramp of more than $65 in the five hours after election results began coming in.

But around midnight Eastern Time, selling in the Dollar began to slow and resistance in Gold prices began to show. In the 13 hours following that resistance-inflection, almost the entirety of that burst-higher has been faded out of markets. Gold prices have come right back to around where they started, giving a long-legged Doji on the daily chart.

Gold Prices Go on a Wild Ride: Ending Back Where They Started

Chart prepared by James Stanley

Moving forward, traders are likely going to want to wait to get a cleaner directional cue on the U.S. Dollar. While it might seem simple to prognosticate that prior trends will return with the Dollar moving higher based on Fed hawkishness – we’ve just had a potentially game-changing factor take place within the U.S. economy, and this could impact the stance of the Federal Reserve in the near-future.

Levels of importance for near-term price action can be seen at $1,310 (prior support/resistance zone), $1,342 (prior swing high and a Fibonacci level) as ‘big picture resistance,’ and the $1,250 low (recent price action swing low, and Brexit ‘panic low’).

--- Written by James Stanley, Analyst for DailyFX.com

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