Hawaii Six O - Gary Wagner
Gold Trades Under Strong Pressure Losing Nine Dollars on the Day
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold trading began on a positive note today with prices fractionally higher to trade up $2 to $3 on the day. This trend would continue for the better part of the trading session. Toward the end of the trading session, the dollar index began to strengthen and move out of negative territory.
After trading for four consecutive days of higher highs, traders have bid the precious yellow metal lower today. With the recent tailwinds provided by a weakening U.S. dollar beginning to diminish, traders began to sell into the market. Selling occurred shortly after the release of the Federal Reserve’s Beige Book. However, it has been dollar weakness which has been the primary component fueling this most recent rally in gold.
The incredibly powerful risk-on environment moving U.S. equities higher seems to of had only a nominal effect on gold. Today’s record high, taking the Dow Jones Industrial Average above 26,000 for the first time in history, might take some wind out of the momentum evident in the precious metal rally.
Currently, the dollar index is trading fractionally higher, up 0.019 points at 9016. This resulted in gold futures trading approximately three dollars lower on the day.
However, at approximately 3:00 PM Eastern standard time, gold futures took a dramatic hard turn and began to trade under significant pressure. Currently, gold futures are trading in a fast market, down almost $10 on the day at $1327.30. While this recent selloff could be based on a moderately strong round of profit-taking, it is more likely that some fundamental event or data corresponds to this quick and brisk turn of events.
Today’s intraday low falls at $1326.70, which is precisely a 23.5% Fibonacci retracement and is, on a technical basis, our first level of potential support. Below that price point is the 38.2% retracement which is at $1303.80. While bullish market sentiment still prevails, today’s decline is more profound than any of the other price declines that have been part of this current rally.
Tip Toe Through the Tulips Part II
In yesterday’s report, we spoke about the precarious state that cryptocurrencies are currently in. We made a loose comparison to the tulip crash in Holland and the current extreme volatility with Bitcoin. One commonality about these events is that both tulips during the crisis and cryptocurrencies at present have a value that in most likelihood is completely removed from their intrinsic values.
Since the futures contracts began to trade on the CBOE and the CME, traders have witnessed an extreme level of volatility of an unprecedented magnitude. The CBOE futures first day of trading opened at $15,000 per Bitcoin. Within the first week, traders ran pricing up to well over $20,000 per coin, before following to $11,000 within a week after reaching the all-time high.
The song “Tiptoe Through the Tulips” was originally written in 1929 for the production of Gold Diggers of Broadway. Considering that fact, the song is surprisingly well-suited to describe the current moment regarding cryptocurrency. Cryptocurrency traders need to tread lightly and tiptoe through the tulips, because there’s no guarantee of where their next step will land.
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Wishing you as always, good trading,