Not an exciting week in Gold as it continues to grind lower very steadily, which is worrisome because there has yet to be panic selling; however, like the song from Sgt. Pepper's Lonely Hearts Club Band, Gold's friend Silver is holding ground, and Platinum is threatening to break through its highest level since 2015. Overall, the U.S. Dollar failed to follow through lower over the past two sessions and is now gaining ground. Still, the most significant headwind remains the firm tick up in Treasury yields with a short-term upside move to 1.23% on the table. Since we are focused on Gold, we have a new edition of our free "Gold Trends Macro Book," updated with silver slides. This monthly updated booklet will provide you with all the quantitative analyses of the precious metal's markets. You can request yours here: Free Gold Trends Macro Book.
We will continue to reiterate that fresh weakness in the Dollar is a necessity for Gold amid this inflationary environment of rising Treasury yields and added fiscal spending. The U.S. Dollar correlation to Gold over the past 30 days has been at -0.81, meaning a strong inverse correlation right now.
Lastly, there are two catalysts that we see in the future that can lift Gold; China is coming back from the Lunar New Year and the expiration of March Silver options and futures. The first has proven to bring fresh buying interest in the past, and the latter will help refresh the supply/demand technicals of the complex.
Technicals: Gold chewed through major three-star support at 1829.9-1831 yesterday after several tests this week, but Silver is clinging to major three-star support at 26.91-27.01 and brings hope to the bulls. However, hope is not a risk management strategy. We know that Gold has so far responded to the critical support at 1807-1813 this morning. Our momentum indicator aligns with yesterday's settlement at 1826 but is sloping lower. Gold needs to close above that area at a minimum and it needs to close back above 1829.9-1831, or it will remain vulnerable to added selling. For now, Silver must hold support and track base metals higher to dig Gold out. I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold," which you should print out. The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
Our strategy on Gold
From my last article, "Finding Value in the Gold Price Volatility," We suggested that our clients consider using TWO Micro 10 oz December Gold contracts per $25,000 and buying ONE at 1800 and ONE at 1755, with a stop at 1690. Doing such would ideally risk $1,750. We would look to a gold target of 1975/oz, which would allow for a profit of $4,175. If you would like to be up to date on the developments of our strategies in the futures and commodities markets, please register for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up.
Good luck and good trading,
Phillip Streible Chief Market Strategist 312-858-7303 Phil@Bluelinefutures.com
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