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Trump's infection; next key levels for gold, stocks, and the dollar

Kitco News

Equities markets have moved lower on Friday following news that President Donald Trump contracted COVID-19. The gold price spiked overnight following Trump’s tweet at at 12:54 am EST but stabilized during the trading day.

Peter Reznicek of ShadowTrader.net said equities should have fallen even more, but he remains bullish on the technical signals.

“What I’m seeing in the equities markets right now is kind of reminiscent of a concept I call ‘when what should happen doesn’t’,” Reznicek said. “When you think about it, ‘when what should happen doesn’t’ is really what we’re seeing now. Do you see how much equities markets are up off of the lows?”

Reznicek said that traders should really be focused on how prices are currently moving, as opposed to how they should have been moving.

“I think [equities] should be weaker but they’re not, and you have to just really deal with what is. You cannot get sucked into what I call scenario trading, which is that sort of thinking that if this then that, and you just have knee-jerk reactions to whatever the news cycle is,” he said.

As of 2:00 pm EST, the S&P 500 is down 0.6%, the NASDAQ is down 1.7%, and spot gold is down 0.26%.

“They needed to come in a little bit more and have some sort of rotation out of tech only because tech was so red hot for so long, so I think it was just unsustainable into the beginning of September,” he said.

Gold saw a strong move initially following the news of Trump’s infection. Reznicek remains bullish long-term.

“If you look at an overnight GLD (SPDR Gold Shares) chart which tracks [gold] futures that are 24 hours, there was a big spike,” he said. “In the bigger picture, I’m definitely bullish.”

$1,935 an ounce is the next level that would break the downtrend that gold has been seeing and bring the metal back into an uptrend, Reznicek said.

“In the dollar index, there’s a key level that everybody should watch. When the dollar rallied recently and threatened to break its downtrend, it rallied up to 94.74, and that is a very important line in the sand for the DXY (dollar index). As long as it remains below that swing high of 94.74, I would say that the outlook for the dollar is weak, which obviously makes the outlook for gold bullish,” he said.

Reznicek noted that the dollar and gold are highly inversely correlated at the moment, moving together in “lockstep.”

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.