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Has the Bear Woken Up?

Commentaries & Views

Even with the U.S. dollar trading off of the highs achieved today, and posting a daily decline, gold was unable to sustain any price gains. August Comex futures are currently trading at $1,241.60, which is a net decline of five dollars on the day (-0.40%). Although gold futures closed above a critical level of support at $1,238, it did breach that price point when it traded to a low of $1,236.20. The support level was created back in December and January when pricing reached those lows.

From there, prices stabilized and in mid-December began a rally which would take gold over $130 higher to $1,365.

What makes this recent selloff unique and different than other corrective periods that have occurred since the end of 2015 is that for the first time gold prices have traded to a lower low than the previous low.

Immediately following the apex and all-time record price of $1,900 per ounce in August 2011, gold, for the most part, traded with consistent lower highs followed by lower lows. That trend continued up until the end of 2015 when gold pricing reached a low of $1,040.

From those lows, gold would rally to the highest trading point since the correction when prices touched $1,377 per ounce in June 2016. Prices then corrected to a low of $1,126 per ounce well above the previous low. What would follow would be a series of shallow rallies moving to higher highs, followed by brief corrections that would conclude with a higher low.

Then in September 2017 gold prices once again challenged the highs achieved earlier reaching $1,362, this would be the first of four occurrences in which gold prices would challenge and trade above $1,360 per ounce.

On the last of the four occurrences gold reached a high of $1,369 before it began its correction. The major difference during this current correction is that today gold traded to a lower low than the previous low.

At the same time, technical traders identified a “death cross”, which is an indication that a short-term correction has now become a long-term trend. These two events occurring in a short time span could be the first technical evidence that the bullish market sentiment which has been so prevalent in gold since the end of the multiyear correction has now ended. It could, in fact, be signaling that the bear has woken up.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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