Hawaii Six O - Gary Wagner
Gold Consolidates After Hitting a Record High Close This Week
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Gold pricing consolidated in trading today after market participants took gold pricing to the highest daily closing price this year. As of 4 PM EDT gold futures basis the most active December contract is currently trading down $6.30 (-0.42%), and fixed at $1524.50. The result of this week’s trading even with today’s moderate selloff is that gold has now closed at a new record high for the week. Gold opened on Monday at $1509 per ounce and effectively closed at $1524.50 for a net weekly gain of $15.50.
Last week gold pricing had a sharp price spike as it opened at $1450 and closed at approximately $1508 resulting in a $58 weekly gain and the former record close on a weekly basis. Considering that gold opened at $1314 during the first week of June we have seen the precious yellow metal surge over $200 in the last 2 ½ months.
In fact, since the first week of June market participants have witnessed gold spike higher and enter a period of consolidation that would be followed by another price advance. This pattern of solid price gains followed by periods of consolidation or sideways price action has been a consistent characteristic during the last 2 ½ months.
Because recent price gains in gold have been sharp and dynamic (almost parabolic), which has been followed by sideways price action or consolidation indicates extreme bullish market sentiment and we are not seeing sizable corrections or retracements following the latest price gains. One explanation for this type of price movement is that the underlying fundamentals which have been moving gold pricing higher still remains in play.
It is the trade war between the United States and China that has been the precursor to all of the other fundamentals which collectively have been creating solid and strong bullish market sentiment. First and foremost is the fact the trade war has dampened global economic growth to such a noticeable degree that central banks globally have pivoted from a monetary policy of normalization to that of accommodation. The fact of the matter is that the Federal Reserve and others have reignited a policy of quantitative easing by a series of rate cuts and asset purchases creating monetary liquidity.
While there is no doubt that when these two superpowers come to a mutually acceptable agreement and conclude the current trade war safe haven assets will experience a drop. Up until that point it is highly likely that we will continue to see the basic financial trends that have been evident over the last couple of months continue. These trends include higher safe haven assets like gold, declining yields on bonds and notes, and consistent pressure in the global equities markets.
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Wishing you as always, good trading,