Today it’s all about the precious metal. It’s obvious that the strong ABCD rally which began sometimes in November-December is beginning to wane. After impressive break above the long term resistance at $1250 per ounce, it was observed that long Gold positions were pulled off. Subsequently, a reduction in Gold demand reduced the momentum and therefore a retracement occurred. Gold fell by approximately $15 yesterday. As a new cycle of tightening begins, it will be interesting how gold performs. Remember, flow of capital to this commodity occurs during period of accommodative monetary policy or when there is an overt economic implication. This is when investors become risk averse and move their capital to Gold. With FOMC talks ratcheting up and a probability of a March Rate hike being fronted by voting officials, it will mean prices will likely retrace back to the $1200 handle in the short term. That is about 500 pips from where Gold is trading from now. Trump border adjustment which was meant to raise about $1 Trillion is facing some headwinds. Though Republicans control the senate, decisions going forward won’t be by a majority. Consensus must be reached and decision made with a 60 vote pass mark. This won’t likely materialize. There are senators who are reserved and against this new border adjustment narrative called for by President Trump. Free trade builds an economy; any sort of protectionism is retrogressive and ends up hurting an economy.
Fundamentally, Trump speaks today at 1400 CAT and there are a series of consumer reports from the US later on at the NY session. Watch out for them.
So today, we will look to short Gold. Daily chart bearish engulfing candle means a shift of momentum and the beginning of a bear trend. Bollinger squeeze in the 30 minute means there could be a coming explosion to the down side. Oversold stochastics and reducing volumes support our shorts.
Trade as follows:
Stop Loss: 1256
Take Profit: 1242-a 100 pip move because Gold has an average trading range of 100-150 pips per day.
Have a good trading day.