Brian Booth's Weekly Gold Review (09-04-2012)
As anticipated, last week began with a choppy-to-lower trade in the Gold market after the prior week’s strength. It was expected that there would be an early hangover in the trade after Gold futures broke above the second wedge pattern (as seen on the chart provided) and awaited news from the Jackson Hole Symposium. While the last two years provided dependable, long term programs to base trades from (QE2 in 2010 and Operation Twist in 2011), this year was far less exciting.
Any trader that was involved in the markets last week, especially in the Precious Metals, has already read through Ben Bernanke’s speech, so there is no reason to repeat every word in this article. In short, there were no major changes in policy announced from Jackson Hole, but the FED continues to monitor the markets and stands ready to act if deemed necessary. Sound familiar?
This “middle of the road” announcement was somewhat expected as it seemed more likely that the United States would wait for this weeks policy statement from Europe before a final judgment would be made in the FOMC policy statement next week.
Traders are still unsure what Europe will bring to the table this week, if anything at all. Personally, I anticipate Europe will provide something that will be seen as supportive for the European Currency this week. It is difficult to predict what type of news to expect from their meeting, as the rules and processes for installing new policy in Europe is far more complicated than in the United States. But I believe that Europe understands the amount of negative impact their market has had globally, especially in the last six months. To be fair, things from a macro perspective have been ugly everywhere but Europe continues to drag the most from month to month. I believe that Europe’s “support” will involve the ECB purchasing Bonds and trying to somehow level the playing field for countries like Spain and Italy that continue to get drowned with higher borrowing costs. I expect that any announcement that provides support from the ECB will be seen as supportive for global markets, including Gold.
From a technical perspective, I will look for Gold to trade around $1700 (December Futures) for the early part of the week. If the trade continues to bid up, look for $1725 to be the next upside target. I would also expect that pullbacks would be bought around $1680, then around $1670 (see breakout on chart). If Gold closes below the trendline breakout price, the proverbial “line in the sand” should be the 200 day moving average around $1650. September has been a very supportive month over the last thirty years in Gold, so I do not expect this year to be any different.
Good luck this week traders and as always, feel free to call or email my office with any comments regarding trading Gold or the futures market in general. I can be reached by phone at (888) 272-6926 or by email at firstname.lastname@example.org.
September 4, 2012 (Brian Booth, Long Leaf Trading Group)