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Gold's Death Spiral

Commentaries & Views

Tuesday saw gold make a nice rebound from yet another down day and close higher on the day. Today with the FOMC announcing a decision on interest rates, gold has found its way lower once again.

Between today and Friday, there are two big news items that can change the course of the gold death spiral -- today’s FOMC meeting and Friday’s jobs report. The numbers by themselves are meaningless. The key is what the market is expecting.

Traders and investors have a bad habit of trying to trade the news, not realizing the news is priced in and they should be trading on the reaction. Remember, in today’s world, news moves at the speed of sound and the big banks pay millions to get that news first. By the time we see the news, it’s old.

Gold will move on the news from the FOMC today and again from the jobs number on Friday. The question is which way. The news itself is worthless but the reaction is priceless. If gold pops higher on the news, that would indicate more downside action remains; a sell-off to $1,180 could signal a bottom. Be ready to react to the news, not predict it.

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