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Gold: Building core positions

Commentaries & Views

After a healthy correction in the gold market this week, relieving some of the pressure from a short-term consolidation formation, we finally have the opportunity to build back up our core positions for the next bull cycle. Many of you questioned why we reduced our excess long exposure to the gold market coming into the latest FOMC meeting near $1980/oz. It was evident that the statements coming from central banks worldwide were pausing to provide additional stimulus measures and using a "wait and see" mentality. Additionally, the U.S. Dollar had fallen for eight straight weeks signaling oversold while becoming a very crowded trade at the bottom. So with the correction underway, many are asking themselves where do we go from here?

Well, the long-term outlook remains intact with "real yields" expected to remain negative for the foreseeable future. A great way of monitoring real yields is by taking the 5yr note yield and subtracting the inflation rate giving you a negative 1.5%. Remember those key variables such as interest rates, inflation, and currency fluctuations are the main drivers to gold. With the Fed keeping an "ultra-loose" monetary policy until 2023 while allowing inflation to rise, this should push gold gradually higher to our upside target of $2275/oz. 

If you did not receive the new edition of our free "Gold Trends Macro Book," it will provide you with all the quantitative analysis of the gold market. You can request yours here: Free Gold Trends Macro Book.

Technical view of the gold market

The price of gold is now responding to our rare major four-star support at 1845.4 and our buy zone at 1855/oz. Yesterday’s recovery stalled in front of the first key resistance at 1885.4-1889.6 despite holding steady above our Pivot and briefly clearing minor resistance. Our momentum indicator comes in at 1868/oz, and the price action above will encourage buying ahead of the weekend. Only a close above 1901-1907 will encourage strong buying waves and work to neutralize the damage from this week.

I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here:  5-Step Technical Analysis Guide to Gold.

Our strategy

If you have been working with us and you were and are looking to position in gold for the long run; we suggested that our clients consider using FOUR Micro 10 oz December Gold contracts per $25,000 and buying TWO at 1910 and TWO at 1855, with a stop at 1790. Doing such would ideally risk $3,700. We would look to a gold target of 2275/oz, which would allow for a profit of $15,700. If you would like to be up to date on the developments of our strategies in the futures and commodities markets, please register for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up

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.