Capitulation around the corner?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
With gold's severe reversal of $1,900 early yesterday morning, it looked like a close below was imminent by 10.30 am. No surprise that gold has come down further to tag the $1875 level. Silver is finding support at the round number of $23 this morning. Platinum seems to continue building a base, and a move to $965 is looking increasingly probable.
With the FOMC just around the corner, traders should continue to expect volatility. USD strength has been dominant, and the rate hike may act as a "sell the news" event, relieving some of the pressure currently on metals and equities.
Gold is now vulnerable to a drop to $1850 on a capitulation, knee-jerk sell-off. For equities, the same type of action may play out with an undercut of the April 26 low on the S&P 500 (which has so far held up). We can’t know for sure whether capitulation will occur. Still, traders will want to be mentally prepared to take advantage of a buying opportunity and/or to avoid emotional decision-making.
Thanks and have a great day,