During the past month August Gold futures have fallen from $680.00 and traded as low as $642.70. Many technicians, including myself, showed support levels between $640.00 and $642.00. With higher yielding Treasury Instruments and a buoyant U.S. Dollar during the past month it has been very difficult for the Gold market to sustain any significant rallies. In my opinion the strength of the Dollar will not last.
With the housing market on the weak side, the increased rate of foreclosures, and higher energy prices, it is my belief these indicators will catch up with the economy. The price of copper has dropped from $3.75/lb. to $3.43/lb., almost 9%, due in large part to the decline in the housing market. A building contractor once told me they used over 200 pounds of copper in an average new home.
The U.S. Stock Market has also been selling off in the past few weeks, perhaps causing investors to liquidate their precious metal positions to meet margin calls in their Stock Market portfolios.
In my opinion, gold certainly is the king of the precious metals and is viewed as such by the entire world. It reflects the geopolitical views and tensions of the entire world. When trading Gold you must not only be concerned with the U.S. Dollar and the economy of the United States. Gold is a far broader market and reflects the economies of the entire world. When trading gold always be knowledgeable of the latest news in the Middle East. Crude Oil and Gold are considered to be anti- US Dollar, and in a perfect world typically the crude oil and gold trade in the same direction. With that part of the world always in turmoil it bares watching every day.
Trading with a strategy after being well informed will give you the best chance for success.
Manduca Trading LLC