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Are You Smarter Than The Gold Market?

(Kitco News) - Oct. 24 –“Markets are never wrong – opinions often are” said Jesse Livermore, a legendary American stock trader of the 1920.

Trading your opinion can be dangerous to your P/L statement.

At the end of the day, the market is always right. Recent gold market action has been choppy and "noisy." Both the bulls and the bears are biding their time. At times like this, even fundamental traders and investors can find important clues on the chart.

Here are 3 important signals the daily gold chart is showing now:          

  1. The 2016 gold uptrend pattern is broken. The late September/early October sell-off broken the rising bull trendline drawn off the December 2015 low on the daily gold chart.

  2. The short-term gold trend is bearish in a correction phase. The minor trend for gold is down. The gold contract is trading below its 20-day moving average, which is a short-term negative signal. The 20-day moving average, shown in green on Figure 1, is resistance at $1,276.80.

  3. The gold market correction is "respecting" Fibonacci retracement support. For now, December gold futures breached the 38.2% retracement of the December 2015-July 2016 rally move. However, the 50% retracement at $1,218.50 has not been tested. According to traditional Fibonacci theory, a market can retrace up to 61.8% of its prior moving without harming that trend.

Translation: the current retreat in gold can still be considered "corrective" in nature to the multi-month uptrend that began in December 2015.

What's Next?

The bulls and the bears have drawn the short-term lines in the sand. Who will win the battle? The jury is still out. Here are the levels traders can watch now:

  • On the upside: resistance lies at $1,275.90

  • On the downside: support lies at $1,243.20

Trading Tactics:  

The Bullish Scenario: An upside breakout above resistance would signal that the bulls are regaining control of short-term trading action and that the current correction phase may be ending. An initial bullish target is seen at $1,305.50.  

The Bearish Scenario: A downside breakout below support would open the door to another wave of selling. Bearish supports and targets lie at the 50% and 61.8% Fibonacci retracement points.

I know you are smart, but the market is smarter. Listen to what the market is telling you and trade it. Don't force your opinions on the market – you'll probably end up regretting it.

By Kira Brecht,



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.
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