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Gold: Knee jerk move lower reversing

Commentaries & Views

We have repeatedly discussed the importance of traders being skeptical of a knee-jerk move out of a coil, on a catalyst. Today proved to be no exception in gold, as the metal was hammered to a low of $1,707 spot on the CPI print, before quickly reversing to just about unchanged on the day as of this writing.

The 5-minute chart below illustrates the knee-jerk breakdown and reversal:

Silver did not print a lower low this morning, unlike gold. A sign that the GSR may be in the process of topping, as we had discussed in yesterday’s piece. As also discussed yesterday, this trader continues to believe that the risk in long positions decreases as sentiment hits rock bottom, price becomes stretched below moving averages, and major support levels come into play.

The metals may stay pressured as the market begins to price in expectations for what could be a full percentage point interest hike at the next FOMC meeting. However, metals bulls continue to absorb significant selling pressure in stride, which should bode very well for the medium term.

Thanks and have a great day.

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