Opinion with Peter Hug
Gold Action Very Positive
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - Calling a top or bottom in a market is a fool’s errand. Momentum indicators have proven a much better gauge to determine market reversals and here technical analysis is the tool, to help process entry and exit points, in markets where emotion plays a larger role. The drop in gold prices over the past six months has been driven by a stronger dollar and the perception that the Fed would continue on an aggressive tightening path. This has led to severe pressure on emerging economies, where debt is denominated in dollars and servicing costs have shot higher. One day a weaker dollar means gold pops and the next there is a reversal in the greenback and gold drops. For traders, picking these levels amounts to trading the support/resistance lines with tight stops. We needed gold to hold the $1,192 area. This area was a buy level, with a tight stop for the bulls. A violation here would have set up the test of $1,180, again an entry point with a tight stop. Yesterday gold managed to close above the $1,197 area, again a resistance point which finds us this morning with the potential of the $1,212 area. Would stay long this trade, as long as gold holds the $1,197 line.
Note for physical traders: yesterday the U.S. Mint announced it had sold out of 2018 silver Eagles. The wholesalers immediately raised their premiums by as much as 25%. We think that the increase is temporary and may mitigate in about two weeks. We mention it for the investors that have grown weary of the silver market. For those that have thrown in the towel and want to exit their silver positions, the upside is that bid premiums have also gone higher. So If you have given up on silver and wanted to exit, now would be a chance to at least pick up a higher premium on your sales. We are not suggesting you liquidate, but if circumstances require you to sell your silver Eagles check out the bid premiums from your preferred dealer.